TIDMBAKK
RNS Number : 2093S
Bakkavor Group PLC
08 March 2023
Bakkavor Group plc
2022 Full Year results
Robust performance in line with market expectations, executing
clear plan to protect future profits
Bakkavor Group plc (the "Company") and its subsidiaries
("Bakkavor" or "the Group"), the leading international provider of
fresh prepared food ("FPF"), today announces its audited results
for the 53 weeks ended 31 December 2022 ("FY22").
Robust performance in line with market expectations and balance
sheet strength maintained
-- Like-for-like revenue(1) exceeded GBP2bn, up 10.6%, with
growth led by price and US volume. Including the 53(rd) week and
currency impact, reported revenue of GBP2,139.2m was up 14.3%.
-- Adjusted operating profit(1) of GBP89.4m, in line with market
expectations(2) . Whilst inflation has largely been mitigated
through pricing and self-help measures, profits were down
GBP12.6m.
-- Operating profit of GBP37.8m includes GBP50.1m of exceptional
items(3) , primarily related to the Group's restructuring plan.
-- Good free cash(1) generation of GBP66.8m (2021: GBP91.2m),
which supported debt reduction, dividend payment and the purchase
of shares to satisfy awards under the Group's share scheme
plans.
-- Leverage(1) of 1.9x maintained within the target range,
continued to operate with over GBP200m of liquidity headroom and a
good level of protection from interest rate rises.
-- Total 2022 dividend per share of 6.93p up 5.0%; proposed
final dividend of 4.16p per Ordinary share.
Strong foundations underpin resilient performance
-- UK continued to outperform the market, driven by strong
service, breadth of product range and targeted innovation.
Operationally remained in good shape despite disruption from
ongoing supply chain challenges.
-- Strong US revenue momentum, with growing demand for fresh
meals. Operational challenges, from the pace of growth and customer
contractual dispute, however, put pressure on profits.
-- Trading in China impacted by Covid-related disruption, but
teams' resilience minimised financial impact and good progress in
further strengthening retail presence as we seek to diversify our
revenue stream.
-- Largely mitigated impact of c.GBP230m of inflation,
leveraging the Group's scale and multi-faceted approach, through
pricing, value optimisation, efficiency improvements and tight cost
control.
-- Investment in our people through pay and engagement
activities had a positive impact, and labour pressures have eased;
availability improved, and employee turnover has tracked down in H2
2022.
-- Targeted approach to sustainability delivered good progress;
UK food waste improved by 110bps to 8.05%, and Group net carbon
emissions reduced by 18.9%.
Clear plan in place to protect 2023 profits, on track to deliver
targeted savings
-- Early FY23 trading encouraging; UK volumes in line with
expectations, despite recent fresh produce availability challenges,
gained further market share and confident of continued
outperformance with a strong pipeline of opportunities.
-- Near-term focus in the US shifted from growth to profit;
operational improvement and cost reduction plans being embedded,
with a more measured approach to growth to help minimise
disruption.
-- Positively in China, volumes have shown a gradual recovery in
recent weeks. Whilst we anticipate some ongoing disruption in the
near-term, we remain confident in the long-term prospects for the
market.
-- Plan on track to deliver GBP15m savings in FY23; embedded new
leadership structure, UK operations aligned to two sectors and two
UK sites to close, with volume transfer, in Q1 2023.
-- The cash costs of implementing the plan are GBP17.1m, with
most of the cash outflow in FY23, and together with GBP33.0m of
impairment charges, are recognised as exceptional items(3) in
FY22.
-- Confident in delivering 2023 adjusted operating profit within
the range of market expectations(2) , as our clear strategy, action
plan, scale, strong relationships and balance sheet strength, leave
us well-placed to move forward with confidence.
FINANCIAL SUMMARY
GBP million (unless otherwise
stated) FY22 FY21 Change
------------------------------------ ------- ------- --------
Group revenue 2,139.2 1,871.6 14.3%
Like-for-like revenue(1) 2,069.0 1,871.6 10.6%
Adjusted EBITDA pre IFRS 16(1) 146.2 154.2 (5.2)%
Adjusted operating profit(1) 89.4 102.0 (12.4)%
Adjusted operating profit margin(1) 4.2% 5.4% (120)bps
Exceptional items(3) 50.1 - (50.1)
Operating profit 37.8 102.0 (62.9)%
Operating profit margin 1.8% 5.4% (360)bps
Profit before tax 18.1 81.4 (77.8)%
Basic earnings per share 2.2p 9.8p (7.6)p
Adjusted earnings per share(1) 9.5p 10.4p (0.9)p
Free cash flow(1) 66.8 91.2 (24.4)
Operational net debt(1) (284.9) (293.7) 8.8
Total dividend per share 6.93p 6.60p 5.0%
------------------------------------ ------- ------- --------
1. Alternative Performance Measures ("APMs"), including
'like-for-like' ("LFL"), 'adjusted' and 'underlying' are applied
consistently throughout the FY22 full year results statement and
defined in full and reconciled to the reported statutory numbers in
Note 11. Note FY22 includes 53 weeks of trading, and the 53(rd)
week is excluded from LFL revenue. All other FY22 measures include
the 53(rd) week.
2. Based on company compiled consensus ("Consensus") which
includes all covering analysts. Adjusted operating profit Consensus
for 2022: GBP88.4m, with a range of GBP86.7m to GBP89.1m and 2023:
GBP84.1m, range GBP80.0m to GBP89.0m.
3. A breakdown of exceptional items are included in Note 3.
Mike Edwards, CEO, commented:
"2022 has been a year of challenge and disruption. Despite this
difficult environment, I am pleased with the robust financial
performance, strong operational delivery and the agile response
demonstrated by our teams, which has underpinned this delivery. I
would like to thank the entire team for their ongoing commitment
and relentless energy in dealing with the challenges that we faced
through the year.
The decisive action we have taken to protect profits - to
restructure our operations, re-focus our regional priorities and be
more targeted in our investment - combined with our strong balance
sheet, provide us with a stronger platform to move forward with
purpose and confidence.
PRESENTATION
A copy of the 2022 full year results is available on
www.bakkavor.com/en/investors/results-and-presentations
We will be presenting to analysts in-person and via a webcast at
09.00am on 8 March 2023 through the investor section of the Group's
website at: https://app.webinar.net/P6JKR7gR2wz . The presentation
can also be accessed via a replay service shortly after the
presentation has concluded.
ENQUIRIES
Institutional investors and analysts:
Ben Waldron, Chief Financial Officer
Emily Daw, Head of Investor Relations +44(0)20 7908 6114
Financial media: bakkavor@mhpgroup.com
Katie Hunt, MHP +44(0)20 3128 8794
Rachel Farrington, MHP +44(0)20 3128 8613
Oliver Hughes, MHP +44(0)20 3128 8622
About Bakkavor
We are the leading provider of fresh prepared food in the UK,
and our presence in the US and China positions the Group well in
these, high-growth markets. We leverage our consumer insight and
scale to provide innovative food that offers quality, choice,
convenience, and freshness. Around 18,500 colleagues operate from
45 sites across our three markets supplying a portfolio of over
2,900 products across meals, pizza & bread, salads and desserts
to leading grocery retailers in the UK and US, and international
food brands in China.
LEI number: 213800COL7AD54YU9949
Disclaimer - forward-looking statements
This statement includes forward-looking statements. By their
nature, forward-looking statements involve risk, uncertainty and
other factors, which may cause the actual results and developments
of the Group to differ materially from any results and developments
expressed or implied by such forward-looking statements. You should
not place undue reliance on any forward-looking statements. These
forward-looking statements are made as of the date of this
statement. The Group is under no obligation to publicly update or
review these forward-looking statements other than as required by
law.
CHIEF EXECUTIVE'S OVERVIEW
It is an honour to have taken on the role of CEO, and I would
like to thank Agust for his outstanding leadership of Bakkavor over
the last 36 years and his support during my time in the Group. I
joined the business in 2001 and am proud to have played a part in
the evolution of the Bakkavor business over the last 20 years or
so. The current environment is incredibly challenging, but I
strongly believe that challenges create opportunities. Bakkavor is
a resilient business with strong foundations - we have a fantastic
team, a broad range of quality products, strong customer
relationships, scale and flexibility across our operations, and
significant growth opportunities internationally.
Clear strategy in place, with refined focus to deliver
returns
The strategy of the Group remains clear and unchanged. We are
focused on driving returns from our market-leading position in the
UK, whilst also accelerating profitable growth internationally.
These priorities are underpinned by our relentless focus on
operational excellence, and on being a trusted partner for all of
our stakeholders. Our strategy remains even more relevant today
against a challenging backdrop, but we need to employ different
tactics to underpin its delivery. We have already taken decisive
action to protect profits, under three focus areas:
1. Leaner organisational structure
2. Clear and focused regional priorities
3. Enhanced focus on managing cash
These initiatives will deliver savings of GBP15m in FY23 and
GBP25m on an annualised basis, and provide us with a stronger
platform from which to move forward positively and with purpose as
we face what will be another difficult year. The cash costs of
GBP17.1m to implement the plan, together with GBP19.5m of non-cash
impairment charges, are recognised as exceptional items in
FY22.
Supported by our robust financial position, these actions will
ensure that we continue to deliver for colleagues, customers and
shareholders. As we go through this transition, we will continue to
protect the Group's fundamentals around safety, quality and
service, with an absolute focus on delivering for our
customers.
Decisive action to protect profits under three focus areas
1. Leaner organisational structure
We have put in place a new leadership structure which will
create renewed energy, focus and purpose. Operationally, we have
aligned our UK business around two sectors, Meals and Bakery, which
will deliver synergies. Meals combines our existing Meals and
Salads businesses, given the dynamic movement of volume that has
become the norm between sites, and Bakery combines our Pizza, Bread
and Desserts businesses to exploit their process similarities. To
create better alignment across our business, we have streamlined
our UK structure by moving to functional reporting for our HR and
Finance teams, and plans are underway to implement this in the US
too. Together, this has necessarily resulted in a number of people
leaving our business and we continue to support our colleagues
through this transition.
2. Clear and focused regional priorities
UK: We will drive an aggressive plan to mitigate the impact of
ongoing inflation and volume pressures by leveraging our scale and
strength, working collaboratively with our customers to recover
inflation, and implementing specific cost and efficiency plans. The
investment we have made to enhance capacity across our sites,
combined with our experience of dynamically transferring volume
between sites, means we are well-placed to consolidate volume and
better leverage our cost base. Following a detailed review of our
footprint, we are closing two UK sites (Bakkavor Desserts Leicester
and Bakkavor Salads Sutton Bridge) where volumes can be absorbed
across our other sites. We continue to work with affected
colleagues to secure alternative roles.
US: The growth opportunity remains attractive as the Fresh
Prepared Food market is still in its infancy. To date, the pace of
growth in our US business has put pressure on operational
performance and impacted margin conversion. We are therefore
shifting our focus from growth to profit to drive margin
improvement. We have a renewed focus on operational execution and
efficiency, and cost reduction plans, as well as further leveraging
our UK talent pool to provide support and expertise.
China: Severe Covid-related restrictions have created disruption
for our factories and demand, particularly given our customers are
largely quick-service restaurants and coffee shops, impacted by
lockdowns and high case numbers. Now that restrictions have been
lifted, the priority for our China team is on rebuilding volume to
leverage our well-invested factory footprint, with a particular
emphasis on diversifying our business by growing our presence in
the grocery retail channel.
3. Enhanced focus on managing cash
We have reviewed capital plans to reduce our overall spend
whilst protecting our strategic investments at our bread site in
Crewe, UK and, once profitability improves, our ready meals site in
Charlotte, US. We will continue to ensure spend is allocated to
critical compliance and maintenance programmes, along with
targeting efficiency improvements. We are also seeking to create
benefit from improving working capital, with a particular focus on
stock reduction.
Robust performance in a tough trading environment
2022 has been a year of challenge and disruption. We have seen
significant inflationary pressures across our cost base and on
household budgets, which in turn have driven changes in consumer
behaviour. We have also had to contend with supply chain disruption
as global events continue to cause instability which, combined with
a tight labour market, has created a difficult trading
environment.
It is in times like these that partnerships and collaboration
come to the fore. I would like to thank our colleagues for their
ongoing hard work and commitment during this challenging period,
and our customers and suppliers for their continued support and for
working alongside us to navigate these headwinds.
We have delivered a robust performance against this challenging
backdrop. Like-for-like revenue grew by 10.6%, to exceed GBP2bn.
This largely reflects the impact of price, up 9.2%, and in the UK,
while volume was broadly flat, we gained market share offsetting
soft underlying demand. Strong volume momentum continued in the US,
with price increases coming through in the second half, whilst in
China Covid restrictions continued to adversely impact volumes.
The UK business has proved resilient against a challenging
backdrop, leveraging its scale and flexibility to deliver for
customers, whilst using innovation and insights to adapt to
changing consumer behaviours and strengthen our market-leading
position.
The US delivered good growth, and the future opportunity of the
underdeveloped market is significant. Profits, however, came under
pressure due to operational disruption from onboarding volume
growth, a lag in inflation recovery and the volume impact in Q4
2022 from a contractual dispute with a customer. A renewed focus on
driving operational improvement, along with cost reduction plans,
should provide a stronger base on which to deliver margin
improvement going forward.
Whilst our China business has continued to be impacted by
ongoing severe Covid-related restrictions, volumes have shown a
steady recovery as mobility restrictions have eased, and we
continue to believe in the medium- to long-term prospects for this
region, where we now have a well-invested factory footprint.
During my 20-year-long career at Bakkavor I have never
experienced such high levels of inflation, equating to c.GBP230m of
cost headwinds in 2022, equivalent to a 14% increase in costs
year-on-year. Our multi-faceted approach, across pricing, value
optimisation, operational efficiency improvements, leveraging our
scale and tight cost control, has enabled us to largely mitigate
the impact.
The Group's underlying performance for the year was in line with
market expectations, with adjusted operating profit of GBP89.4m
(FY21 GBP102.0m).
The Group's balance sheet remains in a strong position, with
leverage within our target range at 1.9 times and significant
liquidity headroom of over GBP200m against our debt facilities. We
have been disciplined in our approach to capital allocation, but
continue to have well-invested factories. Our spend in the year has
concentrated on expanding capacity at two of our US sites, to
underpin the strategic growth opportunity in meals, and on
efficiency improvements in the UK to drive operational
excellence.
Continued progress in supporting our people and
sustainability
I am proud of all we are doing for our teams and communities
through our Trusted Partner ESG strategy and broader people agenda.
In 2022, 86% of our colleagues participated in our engagement
survey, and the feedback provides us with opportunities to make
Bakkavor an even better place to work. In particular, we recognise
the demands of working in the fast-paced environment that Fresh
Prepared Food manufacturing requires, and we also understand that
there is more that we can do to support our people.
Whilst the broader labour market remains tight, through the year
we have seen the pressures gradually easing. This is particularly
evident in the availability of people, with a reduced level of
absences in our own workforce and agencies. Furthermore, whilst
staff turnover marginally increased on last year, levels have
tracked down in H2 2022, albeit remaining higher than ideal.
It is pleasing to see the investment we have made in our people
has had a positive impact, with a c.10% investment in factory pay
rates, upweighted engagement activities and the launch of our new
values. The majority of our factory colleagues benefitted from an
out-of-cycle pay award and an annual pay increase. Our new values,
launched in early 2022, have been positively received, and we are
continuing to embed them into our culture and ways of working.
We have refined our approach under our Trusted Partner ESG
strategy to be more targeted. Going forward, our efforts will be
centred on three priority issues: food waste, climate and Net Zero,
and environmentally sustainable sourcing. As well as having a
positive impact from an environmental and social perspective, we
also recognise that there are financial benefits to making progress
in these key areas. As such, we are focused on improving our
non-financial data and processes, and on developing our capital and
operational plans.
In 2022 we enhanced our operational understanding and focus on
food waste and the benefit of this has already begun to
materialise, with food waste reduced by 110 basis points to 8.05%
on last year. We have also continued to develop our plans to reach
Net Zero by 2040. In 2022, our Group net carbon emissions reduced
significantly, by 18.9% year-on-year, which was supported by our
investment in refrigeration upgrades and energy initiatives. We
also remain committed to delivering on our commitments across the
other areas under our Trusted Partner strategy, which are
well-embedded into our day-to-day operations.
Confident of emerging stronger from current conditions
We expect the challenging trading environment in 2022 to
continue into the coming year, as consumers are impacted by the
cost-of-living crisis. Inflation across the cost base is also
expected to persist, particularly in energy and labour, and we
expect an increase in costs of c.6% to 8% in 2023.
Trading in early 2023 has been encouraging, despite fresh
produce availability challenges which are expected to continue
until April. Our UK business has continued to gain market share and
plans to help drive margin improvement and reduce costs in the US
are being embedded, with a new leadership structure in place from
April 2023. Our President of Bakkavor USA, Pete Laport, is leaving
in mid-March and we thank him for his contribution and commitment
during his time with the US business. In China, as the region is
emerging from Covid we have seen a gradual recovery in volumes and,
whilst we anticipate some ongoing disruption in the coming months,
the outlook for the region is more positive.
Progress under our action plan is on track to deliver the
expected savings, with the two UK sites due to close by the end of
Q1 2023. This decisive action to reduce costs and protect our
business, combined with our clear strategy, focused regional
priorities, targeted investment, unique scale and breadth and
balance sheet strength, provides us with an even stronger platform
from which to move forward positively. We are confident in our
ability to deliver 2023 in line with market expectations and are
well-placed to capitalise on the medium- to long-term
opportunity.
OPERATIONAL REVIEW
United Kingdom: Resilient performance, with scale and breadth
leveraged to mitigate the impact of macro-headwinds and gain market
share. Reshaped operations further strengthen strong
foundations.
GBP million FY 2022 FY 2021 Change
------------------------------------- -------- -------- ---------
Revenue 1,783.1 1,592.4 12.0%
Like-for-like revenue(1) 1,752.3 1,592.4 10.0%
Adjusted operating profit(1) 92.7 97.8 (5.2%)
Adjusted operating profit margin(1) 5.2% 6.1% (90bps)
Operating profit 54.6 97.8 (44.2%)
Operating profit margin 3.1% 6.1% (300bps)
------------------------------------- -------- -------- ---------
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 statutory measures in Note 11.
Trading performance
Like-for-like revenue increased 10.0% to GBP1,752.3m (2021:
GBP1,592.4m), and was up 12.0% on a reported basis, which includes
the impact of the 53(rd) week. The growth was primarily driven by
price and, while volumes were broadly flat, we gained market share,
in a period when consumer demand has been under pressure.
In the UK we faced c.GBP200m of cost inflation in 2022 - the
largest level of inflation the UK business has ever experienced.
Our teams' commitment to mitigate the impact, through pricing and
internal levers across value optimisation, operational efficiency,
leveraging our scale and tight cost control, meant adjusted
operating profit was only down 5.2% to GBP92.7m (2021: GBP97.8m).
The dilutionary impact of passing-through cost increases, combined
with an element of unrecovered inflation, meant adjusted operating
profit margin was down 90 basis points to 5.2%.
As the environment is expected to remain tough, we have taken
action to protect profits in 2023. This has resulted in GBP36.6m of
exceptional charges in 2022 related to the corporate and UK
operational restructure, and closure of two UK sites (of which
GBP17.1m cash and GBP19.5m non-cash impairment charges). Including
these costs, operating profit was GBP54.6m at an operating margin
of 3.1% (2021: GBP97.8m, 6.1%).
Outperformed the market, underpinned by strong service, breadth
of product portfolio and targeted innovation
At a market level, performance across the Fresh Prepared Food
categories has been varied as consumers have adapted their
behaviours in response to cost-of-living pressures. Consumers are
choosing to eat out less and are seeking more affordable weekend
treats, benefitting the top-tier meals and meal deal offers. Pizza
and bread have also held up well, with value ranges performing
strongly and the category benefitted from the FIFA World Cup in Q4.
Desserts volumes, however, were impacted as consumers cut back
their spend on more discretionary items, and salads were impacted
as consumers switched from more basic products, such as bagged
leaf, to cheaper wholehead equivalents.
Against this backdrop, Bakkavor further strengthened its number
one position with market share gains. Consistent high customer
service levels, the breadth of our product range across categories
and price points and targeted innovation set us apart from our
competitors. The year also ended strongly with Christmas trading in
line with our expectations.
From a market share perspective, Bakkavor outperformed across
meals, desserts and salads, whilst our pizza and bread performance
was marginally behind the market due to our customer mix and
reduced promotional activity. Some of the highlights include a
strong performance in our premium and Italian meals ranges, and
expanded range and meal-deal offer under the Pizza Express brand.
We have also seen new, younger consumers buy into our categories
with strong momentum in The Delicious Dessert Company brand, which
delivered 370% revenue growth and products are now available in
over 1,100 stores.
With our salads range focused on more 'value-added' products,
and a good recovery in food-to-go salads and wraps post-Covid, the
impact of softer volumes seen across the market in more basic
salads products has, for our business, been limited. The hot summer
and continued post-Covid recovery supported a good performance for
Bakkavor in salads. Servicing peak volumes in the summer for our
customers was underpinned by our forward-planning on labour and
targeted capacity and efficiency investments.
Value-seeking behaviours by consumers, and our own self-help
efforts to mitigate inflationary pressures, have meant that our
product development activity in 2022 centred on value optimisation.
Of the 850 products we launched in 2022, 60% related to the
redevelopment of existing products. Examples include recipe
reformulation in pizza to meet HFSS guidelines, packaging weight
reduction on a range of ready meals, and the removal of plastic
lids from a range of dressed salads to support our sustainability
agenda and reduce the use of plastic.
Reshaped operations to protect profits
The scale, agility and resilience of our operations have come to
the fore in a period where there has been ongoing and significant
supply chain disruption, and unprecedented levels of inflation.
Leveraging our well-established global supply chain has been
pivotal in helping mitigate the impact, and we have benefitted from
the added scale that our customers provide by buying certain
ingredients together. We are also thankful for the support we have
received from our customers on price, through both pass-through
mechanisms and constructive discussions on costs that sit outside
these mechanisms. Operationally, we have maintained our shape and
delivered strong KPIs across health and safety, food safety and
customer service.
Whilst we maintained a tight control of costs through 2022, our
Group plan to protect profits saw us take more significant action
in Q4. We have operationally consolidated our UK business from four
to two sectors, Meals and Bakery, and moved our HR and Finance
teams to functional reporting. This has streamlined our structure,
helped focus our activity and created greater accountability across
our business. We also completed a review of our manufacturing
footprint, which resulted in the difficult but necessary decision
to close two sites: Bakkavor Desserts Leicester and Bakkavor Salads
Sutton Bridge. Both sites are on track to close by the end of Q1
2023; Sutton Bridge closed at the end of February and Leicester is
due to close by the end of March, with production transferring to
other sites where we have already invested in capacity and
capability. Whilst a challenging time for affected colleagues, we
have supported them by offering alternative roles at other sites,
as well as hosting job fairs and working with local employers.
Targeted investment to drive operational excellence
The 'Excellence' pillar of our strategy is underpinned by our
relentless focus on efficiency. In 2022, our GBP43m of capital
investment has centred on operational improvement projects, along
with ongoing maintenance. Examples include automated salad lines,
and capacity increases and packaging equipment replacement in
stir-fry. Our new manufacturing system is also now in place at all
but one of our UK factories, driving our operational performance
improvements. In addition, the conversion to LED lighting and
previous investment in harnessing heat released from refrigeration
systems has helped reduce costs and supported progress on our
sustainability commitments.
With our Group-wide enhanced focus on cash, we will continue to
prioritise capital spend on productivity initiatives. Our strategic
investment in Bakkavor Bread Crewe, to increase flatbread capacity
and productivity, is underway and on track to commission in H2
2023, and we are investing to enhance our fresh-cut fruit capacity
and efficiency. The data-driven insight provided by our new
manufacturing system is also already helping build our pipeline of
future opportunities to drive further efficiency.
Confidence in continued market share gains, with actions
underway to further strengthen resilient foundations
We have taken decisive action to protect profits as the trading
environment is anticipated to remain challenging through 2023. Our
plan in the UK is clear; we will drive an aggressive plan to
mitigate the impact of ongoing inflation and volume pressures by
leveraging our scale and strength, working collaboratively with our
customers to recover inflation and embedding our cost saving and
efficiency plans. Whilst we cannot predict exactly how consumer
spending will evolve, we will continue to leverage our insight, and
adapt our ranges to ensure our products deliver the value and
quality that consumers desire. Building on our outperformance in
2022, we are confident we will continue to gain market share, with
a strong pipeline of opportunities and we are well placed to
benefit from an increasingly unstable supply base. We are
encouraged by trading in early 2023, with volumes in line with
expectations despite fresh produce availability challenges, and
continued market share gains. Overall, our new re-energised
leadership team is well-placed to deliver on our plan, and this
will further strengthen the resilient foundations of our
business.
United States: Delivered strong revenue growth, and demand for
fresh meals remains unabated. Looking ahead, we have a clear focus
on operational performance to deliver sustainable improvement.
GBP million FY 2022 FY 2021 Change
------------------------------------- -------- -------- ---------
Revenue 255.3 180.1 41.8%
Like-for-like revenue(1) 226.2 180.1 25.6%
Adjusted operating profit(1) 3.3 8.9 (62.9%)
Adjusted operating profit margin(1) 1.3% 4.9% (360bps)
Operating (loss) / profit (0.5) 8.9 (105.6%)
Operating (loss) / profit margin (0.2%) 4.9% (510bps)
------------------------------------- -------- -------- ---------
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 statutory measures in Note 11.
Trading performance
Strong revenue momentum in the US has continued, with
like-for-like revenue up 25.6% to GBP226.2m. This reflects strong
volume growth and, in the second half of the year, some impact of
price. Including the impact of currency, GBP25.5m, and the 53(rd)
week, reported revenue was up 41.8%.
Operationally, onboarding this significant growth and the
withdrawal of volume by a single customer due to a contractual
dispute since November 2022, has created disruption and put
pressure on profits. This was particularly apparent in our East and
West Coast sites, Charlotte and Carson, where we have seen the
majority of volume growth. Combined with the lag in recovering
inflation, this has meant adjusted operating profit was down
GBP5.6m to GBP3.3m at a margin of 1.3% (2021: 4.9%). The operating
loss of GBP0.5m includes GBP3.8m of exceptional charges related to
the impairment of inventory and trade receivables with the above
customer.
Strategic and operational progress
Demand for our fresh, high-quality products has remained strong.
Our customers continue to see our fresh meals offering as a key
differentiator versus their competitors and to attract consumers
into store. Fresh meals now comprise over 50% of our US revenue,
which is up over 30% year-on-year, benefitting from the full-year
effect of the national meals programme win; this launched in the
summer of 2021, combined with range extensions and the introduction
of over 45 new meals products in 2022. We also onboarded a new
customer in July 2022 for whom we are delivering a range of ten
fresh meals in over 250 stores across the Midwest region.
Inflation remained elevated through 2022, particularly in
poultry and distribution, and whilst there was a timing lag, our
customers have been supportive of the pricing action we have taken.
We also have several initiatives in place to help mitigate the
impact on both costs and our supply chain, including the new
sourcing of key commodities to improve price, and reducing sourcing
distance and inventory requirements.
Labour availability remains a challenge across our industry. We
continue to be agile in our approach to recruitment in order to
keep up with the rapid pace of growth, and have plans in place to
streamline this process and improve training for new colleagues. We
also continue to leverage the wealth of experience from our UK
business; the recent appointment of a new US Finance leader, who
was previously Financial Controller within our UK Pizza and Bread
business, is just one example of this.
Looking ahead, our near-term focus has shifted from growth to
profit: driving operational performance and reviewing our cost base
to improve margin in a sustainable way. To support the delivery of
this, our approach to growth will be more measured and as we seek
to minimise disruption, our capacity investment in the region will
only recommence once profit momentum in the business has returned.
Robust operational improvement and restructuring plans are now
being embedded, with a new leadership structure to be in place from
April 2023. Our President of Bakkavor USA, Pete Laport, is leaving
in mid-March and we thank him for his contribution and commitment
during his time with the US business. Whilst the benefit of our
plans will take time to deliver, we expect to see some margin
improvement through 2023. We are making progress to reach
resolution on the contractual dispute with a customer, which is
expected to reach closure by end of Q2 2023. The pipeline for
growth in this underdeveloped market, however, remains significant
and we remain excited about the medium-term opportunity for our
business and converting this growth at an attractive and
sustainable margin.
China: Trading impacted by Covid-related disruption, but teams'
resilience minimised financial impact and good progress made in
diversifying our channels. Confident that the long-term prospects
remain attractive.
GBP million FY 2022 FY 2021 Change
----------------------------------- -------- -------- -----------
Revenue 100.8 99.1 1.7%
Like-for-like revenue(1) 90.5 99.1 (8.6%)
Adjusted operating loss(1) (6.6) (4.7) (40.4%)
Adjusted operating loss margin(1) (6.5%) (4.7%) (180bps)
Operating loss (16.3) (4.7) (246.8%)
Operating loss margin (16.2%) (4.7%) (1,150bps)
----------------------------------- -------- -------- -----------
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 statutory measures in Note 11.
Trading performance
Trading continued to be impacted by ongoing Covid-related
challenges, with like-for-like revenue of GBP90.5m down 8.6%
compared to 2021. Reported revenue was up 1.7%, however, including
the impact of currency, GBP8.7m, and the 53(rd) week. Volumes in
the second half began to recover, following a period of severe
regional lockdown restrictions earlier in the year; but with rising
case numbers in the remaining weeks of the year, they have remained
behind pre-pandemic levels.
Underpinned by the teams' resilience, we have sought to protect
our business and maintained a tight control of overheads. However,
against a backdrop of changes in demand patterns in response to
Covid, rising labour costs and inflation, China reported an
adjusted operating loss of GBP6.6m for the year (2021: GBP4.7m).
Included in the operating loss of GBP16.3m is a GBP9.7m non-cash
impairment of our associate in Hong Kong due to the ongoing impact
of Covid on trading performance.
Strategic and operational progress
The trading environment in China remained volatile during FY22
as the government continued to operate a zero-tolerance Covid
policy and implement strict regional lockdowns for most of the
year. Reduced mobility and depressed consumer spending have had a
pronounced negative impact on demand from our customers. This has
been particularly evident for our strategic customers operating
quick service restaurants and coffee chains.
New product development has been limited through lockdown
periods, however, it has quickly returned as we looked to provide
new and exciting products for our customers as their stores
re-opened. Our existing strategic foodservice customers continue to
have aggressive roll-out plans and believe in the medium-term
opportunity.
We have continued to make progress against our strategy of
diversifying our channels. Retail now comprises almost 20% of
revenue and is up over 60% year-on-year. Retail performance has
been robust, and we have launched a new range and expanded our
store distribution with one of our strategic grocery retail
customers, and also expanded our range and increased volumes with
another retailer. Whilst office catering was held back by increased
working from home, volumes have rebounded strongly as workers
returned to the office following relaxation in restrictions.
Operationally, we have had to manage through the challenges
resulting from tight labour availability, supply chain disruption
and fluctuations in demand. The business and our people have
demonstrated great resilience in adapting to this tough
environment. Progress was also made to support our Group Net Zero
target with the installation of solar panels at our site in
Beijing, which provides c.15% of electricity for the site.
Our strategic investment in the region is now complete and we
continue to maintain a tight control of capital spend. The last of
our new sites, Xi'an, saw production transfer from the old site in
mid-November 2022.
Whilst the near-term outlook remains uncertain, it has been
positive to see the steady recovery in volumes through the second
half of the year as restrictions eased, which also led to
improvements in efficiency and margin. The relaxation of quarantine
rules in mid-December 2022 has, however, led to a spike in cases
which has resulted in further volatility in order patterns and
inefficiencies across our factories. Positively, China is emerging
from Covid, and whilst trading at the start of 2023 has continued
to experience some disruption from the ongoing impact of Covid, the
change to China's Covid policy is welcome, and we remain confident
in the long-term prospects for the market.
FINANCIAL REVIEW
Robust performance and in a position of financial strength
Revenue
Group revenue increased 14.3% to GBP2,139.2m (2021:
GBP1,871.6m). LFL revenue, which excludes the benefit of the 53(rd)
week and is at constant currency, was up 10.6% to GBP2,069.0m. Of
this growth, 9.2% was price and 1.4% volume.
UK reported revenue was up 12.0% to GBP1,783.1m (2021:
GBP1,592.4m), and up 10.0% on a LFL basis to GBP1,752.3m. This was
primarily driven by price increases to mitigate significant
inflation seen across our cost base, and some volume growth in the
first part of the year. US reported revenue increased 41.8% to
GBP255.3m (2021: GBP180.1m), and of this increase GBP25.5m
reflected the currency impact of a weaker Sterling. LFL revenue was
up 25.6% to GBP226.2m (2021: GBP180.1m), driven by strong volume
growth from our existing customers combined with pricing action
taking effect in the second half of the year. In China, reported
revenue increased by 1.7% to GBP100.8m (2021: GBP99.1m), with the
benefit of currency more than offsetting the decline in volume due
to the impact of Covid through the year. LFL revenue was down 8.6%
to GBP90.5m (2021: GBP99.1m), however, this full-year result masks
volatility in revenue movements with significant volume declines
during months of severe regional lockdowns, offset by volume
recovery as restrictions eased.
Operating profit
Adjusted operating profit decreased by 12.4% to GBP89.4m (2021:
GBP102.0m). Whilst it is disappointing to see a reduction in profit
of GBP12.6m, this was against a backdrop of GBP230m of inflation.
Adjusted operating margin at 4.2% was down 120 basis points (2021:
5.4%).
In the UK, adjusted operating profit was down 5.2% at GBP92.7m,
as whilst we have been successful in price recovery with customers,
along with driving operational efficiency and tight cost control,
this has not fully offset the impact of significant inflationary
pressure across the cost base. In the US, adjusted operating profit
of GBP3.3m was down 62.9% on 2021. This was driven by the impact of
cost inflation and a lag in pricing recovery, combined with
operational disruption from onboarding significant volume growth in
the first nine months of the year, and in November 2022, the
withdrawal of volume from a single site due to a contractual
dispute. China's adjusted operating loss increased by GBP1.9m to
GBP6.6m. This was due to severe regional lockdowns which heavily
impacted volumes and reduced efficiency, particularly in the first
half of the year, and again in the final few weeks of the year as
Covid began to spread rapidly across the population.
Operating profit decreased by 62.9% to GBP37.8m (2021:
GBP102.0m), with margins down 360 basis points at 1.8%. Operating
profit is after a pre-tax exceptional charge of GBP50.1m and
GBP1.5m of costs incurred in the year associated with the
configuration and customisation of software as a service ("SaaS")
projects, treated as an Adjusting item.
Exceptional items
Exceptional items, excluded from adjusted operating profit,
comprise:
GBPm FY 2022 FY 2021
----------------------------------- -------- --------
Corporate restructuring costs 5.3 -
UK site closures:
11.8 -
* Closure costs 19.5 -
* Impairment charge
Investment in associate impairment 9.7 -
US customer contractual dispute 3.8 -
impairment
----------------------------------- -------- --------
Total exceptional items 50.1 -
----------------------------------- -------- --------
In 2022, the Group incurred an exceptional charge of GBP50.1m.
Of this, GBP17.1m relates to cash restructuring costs for the
closure of two of our UK sites (by the end of Q1 2023) and the
costs of a corporate restructuring, which includes redundancy
payments. The majority of this cash cost will be incurred in 2023.
There is a non-cash impairment charge of GBP19.5m, of which
GBP19.3m relates to fixed assets at the two sites due to close and
GBP0.2m impairment of intangible assets for one of the businesses.
The value of the Group's investment in associated undertakings
based in Hong Kong has been written down in the period by GBP9.7m
due to the ongoing impact of Covid and reduced tourism on the
trading performance of that business. An ongoing contractual
dispute with a US customer has resulted in a GBP3.8m impairment of
inventory and receivables related to this customer. However, we
continue to pursue the recovery of these assets as we seek to reach
resolution on this matter. Of the total exceptionals, GBP19.3m is
cash costs, with GBP2.5m incurred in FY22 and the balance of the
outflow to come in FY23.
Finance costs
Group profit before tax was GBP18.1m (2021: GBP81.4m), which
includes finance costs of GBP20.8m in 2022, up 21.6% on 2021 (2021:
GBP17.1m). This increase was driven by rising interest rates during
2022, partially offset by the voluntary repayments of GBP37.5m of
our more expensive debt in April and September 2021 (previously due
to mature in June 2024).
The interest cost on the Group's bank facilities is SONIA plus a
margin. To hedge against movements in SONIA the Group has GBP150m
of fixed rate interest swaps for SONIA in place until March 2024,
at an average rate of 37 basis points, and has continued to closely
monitor its interest rate exposure. In July 2022, the Group put in
place a further GBP30m of fixed rate interest swaps for SONIA from
March 2024 until March 2026, at an average rate of 233 basis
points. The Group's cost of debt at the end of 2022 was c.3.9% per
annum and is expected to increase further, to c.5% in FY23, given
the recently announced increase in UK interest base rates.
Tax
The Group's profit after tax was GBP12.5m (2021: GBP56.8m). The
Group tax charge for 2022 decreased by GBP19.0m to GBP5.6m (2021:
GBP24.6m). The charge represents an effective tax rate of 30.9% on
profit before tax of GBP18.1m. The underlying effective tax rate
was 21.5% (2021: 29.7%), which excludes exceptional and Adjusting
items. The effective rate is 2.5% higher than the UK statutory tax
rate of 19% mainly due to the effect of non-deductible expenses,
overseas tax losses not recognised in deferred tax and the impact
of a change in the UK corporation tax rate to 25%. The latter
reflecting the government announcement that UK corporation tax will
increase to 25% effective from 1 April 2023, being the rate at
which timing differences are expected to reverse. This does not
impact current taxes. We expect the effective tax rate for 2023 to
increase slightly above the enacted UK corporation tax rate, 25%,
given the UK is where we pay the majority of our corporate
taxes.
GBPm FY 2022 FY 2021
--------------------------------------------------------------------------------- -------- --------
Profit before tax 18.1 81.4
--------------------------------------------------------------------------------- -------- --------
Tax charge at UK corporation tax rate of 19% (2021: 19%) 3.4 15.5
Net non-deductible expenses/ (non-taxable income) (1.2) (1.8)
Non-deductible impairment of investment 1.8 -
Adjustment in respect of prior periods (0.3) 1.5
Other reconciling items(1) 1.9 9.4
--------------------------------------------------------------------------------- -------- --------
Tax charge for the period 5.6 24.6
Add: Tax credit on exceptional items 9.1 -
--------------------------------------------------------------------------------- -------- --------
Tax charge excl. exceptional items 14.7 24.6
Add: Tax credit on adjusting items 0.3 0.8
--------------------------------------------------------------------------------- -------- --------
Underlying tax charge 15.0 25.4
--------------------------------------------------------------------------------- -------- --------
Effective tax rate on underlying profit before tax of GBP69.8m (2021: GBP85.4m) 21.5% 29.7%
--------------------------------------------------------------------------------- -------- --------
1 Other reconciling items - see Note 5.
Earnings per share
Basic earnings per share ("EPS") decreased from 9.8 pence in
2021 to 2.2 pence in 2022. This was primarily driven by the impact
of the exceptional costs which totalled GBP50.1m.
Adjusted EPS, which excludes the impact of exceptional and
adjusting items and the change in fair value of derivative
financial instruments, decreased by 0.9 pence to 9.5 pence in 2022.
This decrease was driven by lower adjusted operating profit, which
was partly offset by a reduction in tax charges. The weighted
average number of shares in issue (used to calculate Adjusted EPS)
during 2022 was 577,575,716 (2021: 579,425,585), and decreased on
2021 due to the purchase of the Group's Ordinary shares through an
Employee Benefit Trust ("EBT") to satisfy share awards under the
Group's share scheme plans.
Cash flow
Net cash from operating activities decreased by GBP16.9m to
GBP127.1m in 2022 (2021: GBP144.0m). This was mainly due to the
lower adjusted operating profit. Working capital, excluding
movements in exceptionals, was slightly lower than the prior year
due to the 53(rd) week in 2022. The cash impact of exceptional
items in 2022 was GBP2.5m (2021: GBP1.2m).
Net cash used in investing activities increased by GBP8.8m to
GBP63.7m in 2022 (2021: GBP54.9m). This was driven by an increase
in capital expenditure in 2022, primarily the strategic investment
in the US, and is against a softer comparative with investment in
2021 delayed to mitigate against the impact of Covid
restrictions.
Free cash flow was an inflow of GBP66.8m, GBP24.4m lower than
the prior year due to the factors set out above.
Capital allocation
We maintain a disciplined approach to capital allocation, with
the overriding objective to enhance shareholder value. In 2022, we
allocated our free cash inflow of GBP66.8m across debt reduction
(GBP8.8m) to support the maintenance of leverage and dividends
(GBP38.8m). To satisfy share awards under the Group's share scheme
plans, GBP3.1m was spent to purchase the Group's own Ordinary
shares through an EBT. The balance of cash was allocated across
IFRS 16 payments, refinancing fees, exceptional items and foreign
exchange.
There were no acquisitions in the year, but we continue to
consider these where they are a strategic fit for our business. In
the medium-term, we remain committed to investing to enhance
returns, maintaining leverage within the target range of 1.5 to 2.0
times.
Investment and returns
Group ROIC was 7.1% for the 12 months to 31 December 2022,
compared to 7.2% in the prior year. This reflects the year-on-year
decrease in adjusted operating profit after tax, with underlying
trading performance down, partly offset by the reduction in
effective tax rate. There was also a marginal decrease in average
invested capital, as the Group has maintained a tight control of
capital spend thereby limiting the increase in invested
capital.
Over the medium-term, the Group expects to see an improvement in
ROIC as recent investments, including the key strategic projects,
deliver an increase in returns. With the Group's enhanced focus on
managing cash, we expect the level of capital investment to reduce
on the prior year at c.GBP50m.
Debt and leverage
Operational net debt decreased GBP8.8m to GBP284.9m. Leverage
(the ratio of operational net debt to adjusted EBITDA) was
maintained at 1.9 times at December 2022 and is within the Group's
target range of 1.5-2.0 times. The Group's liquidity position
remains strong with headroom of over GBP200m against debt
facilities of GBP486m, and comfortable headroom against all
financial covenants. From a debt maturity perspective, on 1 March
2022, the Group extended the maturity date of GBP430m of its core
debt facilities from March 2025 to March 2026.
Dividend
During the year, the Group paid GBP22.8m in respect of the final
dividend for FY21 and GBP16.0m for the interim dividend declared in
September for FY22.
The strength of our balance sheet and cash generation supports
our long-term growth aspirations and commitment to delivering
returns to shareholders. We propose a final 2022 dividend of 4.16
pence per Ordinary share, resulting in a total dividend for 2022 of
6.93 pence per Ordinary share. This represents an increase of 5.0%
on 2021 and is in line with the interim dividend announced in
September 2022. If approved by shareholders, the final dividend
will be paid on 5 June 2023.
Pensions
Under IAS 19 valuation principles, the Group recognised a
surplus of GBP12.8m for the UK defined benefit scheme as at 31
December 2022 (26 December 2021: GBP37.2m surplus). The decrease in
value of plan assets of c.GBP127m was as a result of volatile
markets due to the wider macro-economic environment and this was
more than the decrease in the defined benefit obligation arising
from the gilt yield increases despite the liability hedging that is
in place.
As a result of the volatility in the gilt markets at the end of
September and in early October, the scheme Trustees asked the Group
to provide further collateral for its liability hedging of interest
and inflation rate movements. The Group agreed to provide a GBP15m
short-term line of credit to the scheme to meet this collateral
requirement and, following changes to the scheme's investments, the
line of credit was fully repaid by the end of the year.
The Group and the Trustee agreed in November 2020 the triennial
valuation of the UK-defined benefit pension scheme as at 31 March
2019. This resulted in a funding shortfall of GBP11.7m, which will
be paid over an agreed recovery period ending on 31 March 2024,
with payments of GBP2.5m per annum. The Group is currently in
discussions with the Trustee in respect of the latest triennial
valuation as at 31 March 2022 and the associated updated funding
plan.
Summary
The Group delivered a solid performance against a tough
backdrop. Strong revenue growth reflected our success in taking
pricing action to offset significant inflationary pressures, and
Group adjusted operating profit was in line with market
expectations. We exit the year in a strong financial position, with
leverage within our target range, financing in place through to
FY26 and a good level of protection against interest rate rises.
Whilst macro-headwinds are expected to persist through 2023, our
balance sheet strength, combined with our clear plan to protect
profits, provide the strong foundations from which we can continue
to deliver on our strategy and deliver for our customers,
colleagues and shareholders.
Principal risks and uncertainties
There are a number of potential risks and uncertainties which
could have a material impact on future Group performance and could
cause actual results to differ materially from expected and
historical results. The risk and uncertainties are described in
detail in the 'Risk management and risks' section of the Annual
Report and Accounts for the year ended 31 December 2022, available
on 17 March 2023 on the company website.
Related parties
During the period, Group companies only entered into
transactions with related parties who are members of the Group.
Transactions with Directors and shareholders are set out in Note 33
in the Group's Consolidated Financial Statements for FY22.
In addition, as a result of the volatility in the gilt markets,
the Group's Defined Benefit Pension Scheme was required to provide
further collateral for its liability hedging of interest and
inflation rate movements. The Group agreed to provide a GBP15m
short-term line of credit to the Scheme in October 2022 to meet
this collateral requirement. The line of credit attracted interest
at a rate of 2.1% plus SONIA and was fully repaid by 23 December
2022.
CONSOLIDATED INCOME STATEMENT
53 WEEKSED 31 DECEMBER 2022
53 weeks ended 31 52 weeks ended 25
December 2022 December 2021
------------------------------- ---- ----------------------------------- -----------------------------------
Underlying Exceptional Underlying Exceptional
GBPm Note activities items(1) Total activities items(1) Total
------------------------------- ---- ----------- ----------- --------- ----------- ----------- ---------
Continuing operations
Revenue 2 2,139.2 - 2,139.2 1,871.6 - 1,871.6
Cost of sales (1,576.5) - (1,576.5) (1,330.9) - (1,330.9)
------------------------------- ---- ----------- ----------- --------- ----------- ----------- ---------
Gross profit 562.7 - 562.7 540.7 - 540.7
Distribution costs (89.4) - (89.4) (75.1) - (75.1)
Other administrative
costs (net) (385.6) (50.1) (435.7) (363.9) - (363.9)
Share of results of associates
after tax 0.2 - 0.2 0.3 - 0.3
------------------------------- ---- ----------- ----------- --------- ----------- ----------- ---------
Operating profit/(loss) 87.9 (50.1) 37.8 102.0 - 102.0
Finance costs 4 (20.8) - (20.8) (17.1) - (17.1)
Other gains and (losses) 1.1 - 1.1 (3.5) - (3.5)
------------------------------- ---- ----------- ----------- --------- ----------- ----------- ---------
Profit/(loss) before
tax 68.2 (50.1) 18.1 81.4 - 81.4
Tax (charge)/credit 5 (14.7) 9.1 (5.6) (24.6) - (24.6)
------------------------------- ---- ----------- ----------- --------- ----------- ----------- ---------
Profit/(loss) for the
period 53.5 (41.0) 12.5 56.8 - 56.8
------------------------------- ---- ----------- ----------- --------- ----------- ----------- ---------
Earnings per share
Basic 6 2.2p 9.8p
Diluted 6 2.1p 9.6p
------------------------------- ---- ----------- ----------- --------- ----------- ----------- ---------
1 The Group presents its income statement with three columns.
The Directors consider that the underlying activities are more
representative of the ongoing operations and key metrics of the
Group. Details of exceptional items can be found in Note 3 and
include material items that are non-recurring, significant in
nature and are important to users in understanding the business,
including restructuring costs and impairment of assets. In
addition, the Group uses further Alternative Performance Measures
which can be found in Note 11.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
53 WEEKSED 31 DECEMBER 2022
53 weeks 52 weeks
ended ended
31 December 25 December
GBPm Note 2022 2021
-------------------------------------------------- ---- ------------ ------------
Profit for the period 12.5 56.8
-------------------------------------------------- ---- ------------ ------------
Other comprehensive (expense)/income
Items that will not be reclassified subsequently
to profit or loss:
Actuarial (loss)/gain on defined benefit pension
schemes (26.3) 24.5
Tax relating to components of other comprehensive
(expense)/income 5 6.6 (6.6)
-------------------------------------------------- ---- ------------ ------------
(19.7) 17.9
Items that may be reclassified subsequently
to profit or loss:
Exchange differences on translation of foreign
operations 17.3 2.6
Gain on cash flow hedges 13.3 2.0
Hedging (gains)/losses reclassified to profit
or loss (1.4) 0.4
Tax relating to components of other comprehensive
income/(expense) 5 (3.1) (0.2)
-------------------------------------------------- ---- ------------ ------------
26.1 4.8
-------------------------------------------------- ---- ------------ ------------
Total other comprehensive income 6.4 22.7
-------------------------------------------------- ---- ------------ ------------
Total comprehensive income 18.9 79.5
-------------------------------------------------- ---- ------------ ------------
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2022
31 December 25 December
GBPm Note 2022 2021
---------------------------------------------- ---- ----------- -----------
Non-current assets
Goodwill 655.1 650.1
Other intangible assets 8.8 1.7
Property, plant and equipment 548.1 545.2
Interests in associates and other investments 3.7 11.8
Deferred tax asset 8 12.9 9.9
Retirement benefit asset 12.8 37.2
Derivative financial instruments 9.9 2.6
---------------------------------------------- ---- ----------- -----------
1,251.3 1,258.5
---------------------------------------------- ---- ----------- -----------
Current assets
Inventories 86.2 70.8
Trade and other receivables 161.0 142.8
Cash and cash equivalents 40.2 31.1
Derivative financial instruments 2.7 0.3
---------------------------------------------- ---- ----------- -----------
290.1 245.0
---------------------------------------------- ---- ----------- -----------
Total assets 1,541.4 1,503.5
---------------------------------------------- ---- ----------- -----------
Current liabilities
Trade and other payables (430.0) (390.8)
Current tax liabilities (1.1) (1.3)
Borrowings 7 (13.1) (3.0)
Lease liabilities (11.3) (10.8)
Provisions (22.0) (8.5)
Derivative financial instruments (0.3) (1.7)
---------------------------------------------- ---- ----------- -----------
(477.8) (416.1)
---------------------------------------------- ---- ----------- -----------
Non-current liabilities
Borrowings 7 (309.2) (317.6)
Lease liabilities (85.9) (73.8)
Provisions (15.0) (14.3)
Derivative financial instruments - (0.4)
Deferred tax liabilities 8 (35.7) (40.6)
---------------------------------------------- ---- ----------- -----------
(445.8) (446.7)
---------------------------------------------- ---- ----------- -----------
Total liabilities (923.6) (862.8)
---------------------------------------------- ---- ----------- -----------
Net assets 617.8 640.7
---------------------------------------------- ---- ----------- -----------
Equity
Called up share capital 9 11.6 11.6
Own shares held 9 (3.1) -
Merger reserve (130.9) (130.9)
Hedging reserve 9.5 1.7
Translation reserve 44.5 27.2
Retained earnings 686.2 731.1
---------------------------------------------- ---- ----------- -----------
Total equity 617.8 640.7
---------------------------------------------- ---- ----------- -----------
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
53 WEEKSED 31 DECEMBER 2022
Called
up share Own shares Merger Hedging Translation Retained Total
GBPm Note capital held reserve reserve reserve earnings equity
------------------------------------ ---- --------- ---------- -------- -------- ----------- --------- -------
Balance at 27 December 2020 11.6 - (130.9) (0.7) 24.8 693.3 598.1
Profit for the period - - - - - 56.8 56.8
Other comprehensive income
for the period - - - 2.2 2.6 17.9 22.7
------------------------------------ ---- --------- ---------- -------- -------- ----------- --------- -------
Total comprehensive income
for the period - - - 2.2 2.6 74.7 79.5
------------------------------------ ---- --------- ---------- -------- -------- ----------- --------- -------
Reclassification - - - 0.2 (0.2) - -
Dividends 9 - - - - - (38.5) (38.5)
Credit for share-based payments - - - - - 2.3 2.3
Cash-settlement of share
based payments - - - - - (0.6) (0.6)
Deferred tax 5 - - - - - (0.1) (0.1)
------------------------------------ ---- --------- ---------- -------- -------- ----------- --------- -------
Balance at 25 December 2021 11.6 - (130.9) 1.7 27.2 731.1 640.7
------------------------------------ ---- --------- ---------- -------- -------- ----------- --------- -------
Profit for the period - - - - - 12.5 12.5
Other comprehensive income/(expense)
for the period - - - 8.8 17.3 (19.7) 6.4
------------------------------------ ---- --------- ---------- -------- -------- ----------- --------- -------
Total comprehensive income/(expense)
for the period - - - 8.8 17.3 (7.2) 18.9
Reclassification to inventory - - - (1.0) - - (1.0)
Purchase of own shares 9 - (3.1) - - - - (3.1)
Dividends 9 - - - - - (38.8) (38.8)
Credit for share-based payments - - - - - 1.9 1.9
Cash-settlement of share
based payments - - - - - (0.6) (0.6)
Deferred tax 5 - - - - - (0.2) (0.2)
------------------------------------ ---- --------- ---------- -------- -------- ----------- --------- -------
Balance at 31 December 2022 11.6 (3.1) (130.9) 9.5 44.5 686.2 617.8
------------------------------------ ---- --------- ---------- -------- -------- ----------- --------- -------
CONSOLIDATED STATEMENT OF CASH FLOWS
53 WEEKSED 31 DECEMBER 2022
53 weeks 52 weeks
ended ended
31 December 25 December
GBPm Note 2022 2021
------------------------------------------------- ---- ------------ ------------
Net cash generated from operating activities 10 127.1 144.0
------------------------------------------------- ---- ------------ ------------
Investing activities:
Interest received 0.2 -
Dividends received from associates - 0.7
Purchases of property, plant and equipment (61.1) (59.8)
Proceeds on disposal of property, plant and
equipment 0.1 4.2
Purchase of intangibles (2.9) -
------------------------------------------------- ---- ------------ ------------
Net cash used in investing activities (63.7) (54.9)
------------------------------------------------- ---- ------------ ------------
Financing activities:
Dividends paid 9 (38.8) (38.5)
Own shares purchased 9 (3.1) -
Increase in borrowings 9.7 28.1
Repayment of borrowings (9.2) (60.9)
Principal elements of lease payments (14.0) (11.7)
------------------------------------------------- ---- ------------ ------------
Net cash used in financing activities (55.4) (83.0)
------------------------------------------------- ---- ------------ ------------
Net increase in cash and cash equivalents 8.0 6.1
Cash and cash equivalents at beginning of period 31.1 24.8
Effect of foreign exchange rate changes 1.1 0.2
------------------------------------------------- ---- ------------ ------------
Cash and cash equivalents at end of period 40.2 31.1
------------------------------------------------- ---- ------------ ------------
1. Significant Accounting Policies
Basis of accounting
The financial information set out in this document does not
constitute statutory accounts for Bakkavor Group plc for the period
ended 31 December 2022 but is extracted from the Annual Report
& Accounts 2022. The Annual Report & Accounts 2022 will be
delivered to the Registrar of Companies in due course. The
auditors' report on those accounts was unqualified and neither drew
attention to any matters by way of emphasis nor contained a
statement under either Section 498(2) of Companies Act 2006
(accounting records or returns inadequate or accounts not agreeing
with records and returns), or section 498(3) of Companies Act 2006
(failure to obtain necessary information and explanations).
On 31 December 2020, IFRS as adopted by the European Union at
that date was brought into UK law and became UK-adopted
International Accounting Standards, with future changes being
subject to endorsement by the UK Endorsement Board. Bakkavor Group
plc transitioned to UK-adopted International Accounting Standards
in its consolidated financial statements on 26 December 2021. This
change constitutes a change in accounting framework. However, there
is no impact on recognition, measurement or disclosure in the
period reported as a result of the change in framework. The
Consolidated Financial Statements of the Bakkavor Group plc group
have been prepared in accordance with UK-adopted International
Accounting Standards and with the requirements of the Companies Act
2006 as applicable to companies reporting under those
standards.
The Consolidated Financial Statements comprise the Financial
Statements of the parent undertaking and its subsidiary
undertakings (the "Group"), together with the Group's share of the
results of associated undertakings comprising a 52 or 53-week
period ending on the Saturday of or immediately before 31 December.
Where the fiscal year 2022 is quoted in these Financial Statements
this relates to the 53-week period ended 31 December 2022. The
fiscal year 2021 relates to the 52-week period ended 25 December
2021.
These Financial Statements are presented in Pounds Sterling
because that is the currency of the primary economic environment in
which the Group operates. Foreign operations are included in
accordance with the foreign currency policy set out below.
The Group considers the impact of climate-related factors in the
preparation of the Financial Statements and discloses any material
impact in the relevant Notes.
The Financial Statements have been prepared on the historical
cost basis, except for the revaluation of financial instruments and
retirement benefit plan assets (which are stated at fair
value).
Accounting policies and new standards
The accounting policies applied by the Group are consistent with
those disclosed in the Group's Annual Report. These policies are
consistent with the Accounts for the 52 weeks ended 25 December
2021, except for new standards and interpretations effective for
the first time for the reporting period and for the changes
described below.
The Group has made a change to its accounting policy in relation
to upfront configuration and customisation costs incurred in
implementing Software-as-a-Service ('SaaS') arrangements.
During 2022, the Company began purchasing its own Ordinary
shares from the market through an Employee Benefit Trust called the
Bakkavor Group plc Employee Benefit Trust. These shares are held to
satisfy share awards under the Group's share scheme plans. Own
shares are recorded at cost and are deducted from equity.
Going concern
The Directors have reviewed the historical trading performance
of the Group and the forecasts through to March 2024.
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.
The Directors have also considered the Group's level of
available liquidity under its financing facilities. The Directors
have carried out a robust assessment of the significant risks
currently facing the Group. This has included scenario planning on
the implications of further inflation and the potential impact of
lower sales volumes from reduced consumer demand in response to
increasing retail prices.
Having taken these factors into account under the scenario,
which is considered to be severe but plausible, the Directors
consider that adequate headroom is available based on the
forecasted cash requirements of the business. At the date of this
report, the Group has complied in all respects with the terms of
its borrowing agreements, including its financial covenants, and
forecasts to continue to do so in the future.
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.
2. Segmental information
The chief operating decision-maker ("CODM") 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 into three regions, the UK, US and China, and
manufactures fresh prepared foods and produce in each region.
The Group manages the performance of its businesses through the
use of 'Adjusted operating profit', as defined in Note 11.
Measures of total assets are provided to the Management Board;
however, cash and cash equivalents, short-term deposits and some
other central assets are not allocated to individual segments.
Measures of segment liabilities are not provided to the Management
Board.
The following table provides an analysis of the Group's
segmental information for the period to 31 December 2022:
GBPm Note UK US China Un-allocated Total
--------------------------------- ---- ------- ----- ------ ------------ -------
Revenue 11 1,783.1 255.3 100.8 - 2,139.2
--------------------------------- ---- ------- ----- ------ ------------ -------
Adjusted EBITDA 11 147.7 12.4 (0.1) - 160.0
Depreciation (52.8) (8.7) (6.8) - (68.3)
Amortisation (0.3) (0.4) - - (0.7)
Share scheme charges (1.9) - - - (1.9)
Profit on disposal of property,
plant and equipment - - 0.1 - 0.1
Share of results of associates - - 0.2 - 0.2
--------------------------------- ---- ------- ----- ------ ------------ -------
Adjusted operating profit/(loss) 11 92.7 3.3 (6.6) - 89.4
Exceptional items 3 (36.6) (3.8) (9.7) - (50.1)
Configuration and customisation
costs for SaaS projects (1.5) - - - (1.5)
--------------------------------- ---- ------- ----- ------ ------------ -------
Operating profit/(loss) 54.6 (0.5) (16.3) - 37.8
Finance costs (20.8)
Other gains and (losses) 1.1
--------------------------------- ---- ------- ----- ------ ------------ -------
Profit before tax 18.1
Tax (5.6)
--------------------------------- ---- ------- ----- ------ ------------ -------
Profit for the period 12.5
--------------------------------- ---- ------- ----- ------ ------------ -------
Other segment information:
Capital additions 46.0 39.0 1.9 - 86.9
Interests in associates - - 3.6 - 3.6
Total assets 1,215.1 200.2 73.3 52.8 1,541.4
Non-current assets 1,018.1 167.8 55.5 9.9 1,251.3
--------------------------------- ---- ------- ----- ------ ------------ -------
The following table provides an analysis of the Group's
segmental information for the period to 25 December 2021:
GBPm Note UK US China Un-allocated Total
--------------------------------- ---- ------- ----- ----- ------------ -------
Revenue 11 1,592.4 180.1 99.1 - 1,871.6
--------------------------------- ---- ------- ----- ----- ------------ -------
Adjusted EBITDA 11 149.3 15.7 1.8 - 166.8
Depreciation (52.0) (6.4) (6.8) - (65.2)
Amortisation (0.1) (0.4) - - (0.5)
Share scheme charges (2.3) - - - (2.3)
Profit on disposal of property,
plant and equipment 2.9 - - - 2.9
Share of results of associates - - 0.3 - 0.3
--------------------------------- ---- ------- ----- ----- ------------ -------
Adjusted operating profit/(loss) 11 97.8 8.9 (4.7) - 102.0
Exceptional items - - - - -
--------------------------------- ---- ------- ----- ----- ------------ -------
Operating profit/(loss) 97.8 8.9 (4.7) - 102.0
Finance costs (17.1)
Other gains and (losses) (3.5)
--------------------------------- ---- ------- ----- ----- ------------ -------
Profit before tax 81.4
Tax (24.6)
--------------------------------- ---- ------- ----- ----- ------------ -------
Profit for the period 56.8
--------------------------------- ---- ------- ----- ----- ------------ -------
Other segment information:
Capital additions 59.6 9.0 6.8 - 75.4
Interests in associates - - 11.7 - 11.7
Total assets 1,238.7 144.1 86.7 34.0 1,503.5
Non-current assets 1,068.9 120.2 66.8 2.6 1,258.5
--------------------------------- ---- ------- ----- ----- ------------ -------
All of the Group's revenue is derived from the sale of goods in
2021 and 2022. There were no inter-segment revenues. The
un-allocated assets of GBP52.8m (2021: GBP34.0m) relate to cash and
cash equivalents and derivative financial instruments which cannot
be readily allocated because of the Group cash-pooling arrangements
that are in place to provide funds to businesses across the
Group.
Major customers
In 2022, the Group's four largest customers accounted for 73.2%
(2021: 74.0%) of the Group's total revenue from continuing
operations. These customers accounted for 87.9% (2021: 87.0%) of
total UK 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:
2022 2021
----------- ----- -----
Customer A 32.6% 33.4%
Customer B 20.5% 20.3%
Customer C 12.2% 11.5%
Customer D 7.9% 8.8%
----------- ----- -----
3. Exceptional items
The Group's financial performance is analysed in two ways:
review of underlying performance (which does not include
exceptional items) and separate review of exceptional items that
are material and not expected to reoccur. The Directors consider
that the underlying performance is more representative of the
ongoing operations and key metrics of the Group.
Exceptional items are those that, in management's judgement,
should be disclosed by virtue of their nature or amount.
Exceptional items include material items that are non-recurring,
significant in nature and are important to users in understanding
the business, including restructuring costs and impairment of
assets:
GBPm 2022 2021
------------------------------------------- ------ ----
Corporate restructuring costs (5.3) -
UK site closures:
- Closure costs (11.8) -
- Impairment charge (19.5) -
Investment in associate impairment (9.7) -
US customer contractual dispute impairment (3.8) -
------------------------------------------- ------ ----
Total exceptional items (50.1) -
Tax on exceptional items 9.1 -
------------------------------------------- ------ ----
Total exceptional items after tax (41.0) -
------------------------------------------- ------ ----
2022
In 2022, the Group incurred an exceptional charge of GBP50.1m.
Of this, GBP17.1m relates to restructuring costs for the closure of
two of our UK sites by the end of Q1 2023, and the costs of a
corporate restructuring, which includes redundancy payments,
onerous and other closure costs. The majority of the cash impact
will be recognised in 2023. There is also an impairment charge of
GBP19.3m in respect of the relevant fixed assets at the two sites
due to close and GBP0.2m for the impairment of intangible assets
for one of the businesses and these charges have no cash impact.
The value of the Group's investment in associated undertakings
based in Hong Kong has been written down in the period by GBP9.7m
due to the ongoing impact of Covid on the trading performance of
that business. An ongoing contractual dispute with a US customer
has resulted in a GBP3.8m impairment of inventory and receivables
related to this customer. However, we continue to pursue the
recovery of these assets as we seek to reach resolution on this
matter.
2021
No exceptional costs have been incurred by the Group.
4. Finance costs
GBPm 2022 2021
------------------------------------ ---- ----
Interest on borrowings 16.9 14.2
Interest on lease liabilities 3.1 2.7
Unwinding of discount on provisions 0.8 0.2
------------------------------------- ---- ----
Total 20.8 17.1
------------------------------------- ---- ----
There were no borrowing costs included in the cost of qualifying
assets during 2021 or 2022. Borrowing costs included in the cost of
qualifying assets during prior years arose within the general
borrowing pool and were calculated by applying a capitalisation
rate of 3.0% to expenditure on such assets.
Amounts included in the cost of qualifying assets have been
capitalised under IAS 23 and are therefore subject to deferred tax.
The deferred tax credit to income was GBPnil (2021: GBPnil).
5. Tax
GBPm Note 2022 2021
------------------------------------------------------ ---- ----- ----
Current tax:
Current period 9.7 7.6
Prior period adjustment 1.7 0.2
------------------------------------------------------ ---- ----- ----
Total current tax charge (pre-exceptional items) 11.4 7.8
------------------------------------------------------ ---- ----- ----
Deferred tax:
Deferred tax relating to the origination and reversal
of temporary differences in the period 3.7 7.6
Deferred tax relating to changes in tax rates 1.6 7.9
Prior period adjustment (2.0) 1.3
------------------------------------------------------ ---- ----- ----
Total deferred tax charge (pre-exceptional items) 8 3.3 16.8
------------------------------------------------------ ---- ----- ----
Tax on exceptional items:
Current tax (3.4) -
Deferred tax (5.7) -
------------------------------------------------------ ---- ----- ----
Total tax credit on exceptional items (9.1) -
------------------------------------------------------ ---- ----- ----
Total tax charge for the period 5.6 24.6
------------------------------------------------------ ---- ----- ----
The Group tax charge for the period was GBP5.6m (2021: GBP24.6m)
which represents an effective tax rate of 30.9% (2021: 30.2%) on
profit before tax of GBP18.1m (2021: GBP81.4m). Tax is calculated
using prevailing statutory rates in the territories in which we
operate however most of the Group's profits are earned in the UK
where the statutory tax rate was 19% for 2022 (2021: 19%). The
effective tax rate is 11.9% higher (2021: 11.2%) than the UK
statutory tax rate of 19% (2021: 19%).
The main item which, increases the effective rate by 10.2% is
the tax effect of an exceptional charge relating to impairment of
investments (see Note 3). As in the prior year the effective rate
is also increased by 2.6% in relation to a deferred tax charge
arising in connection with the rate at which we provide for
deferred tax assets and liabilities. This is following the
Government announcement on 3 March 2021 and the substantive
enactment of this measure on 24 May 2021, that the UK corporation
tax rate will increase to 25% effective from 1 April 2023. We have
therefore valued deferred tax assets and liabilities at 25% at the
balance sheet date.
Excluding exceptional items and other Adjusting items the
effective tax rate on underlying activities was 21.5% (2021: 29.7%)
(see Note 11).
The charge for the period can be reconciled to the profit per
the consolidated income statement as follows:
2022 2022 2021 2021
GBPm % GBPm %
---------------------------------------------- ------ ----- ------ -----
Profit before tax: 18.1 100.0 81.4 100.0
---------------------------------------------- ------ ----- ------ -----
Tax charge at the UK corporation tax rate
of 19% (2021: 19%) 3.4 19.0 15.5 19.0
Net non-deductible expenses/(non-taxable
income) (1.2) (6.9) (1.8) (2.0)
Non-deductible impairment of investment 1.8 10.2 - -
Prior period adjustment (0.3) (1.7) 1.5 1.7
Tax effect of losses carried forward not
recognised 1.0 5.5 0.7 0.9
Unprovided deferred tax assets now recognised - - (0.1) (0.2)
Overseas taxes at different rates 0.4 2.2 0.9 1.1
Deferred tax rate differential 0.5 2.6 7.9 9.7
---------------------------------------------- ------ ----- ------ -----
Tax charge and effective tax rate for the
period 5.6 30.9 24.6 30.2
---------------------------------------------- ------ ----- ------ -----
In addition to amounts charged to the consolidated income
statement, the following amounts in respect of tax were
charged/(credited) to the consolidated statement of comprehensive
income and equity:
2022 2021
GBPm GBPm
-------------------------------------------------------------------- ----- -----
Tax relating to components of other comprehensive income/(expense):
Deferred tax:
Remeasurements on defined benefit pension scheme actuarial
(loss)/gain (5.0) 4.6
Deferred tax rate change on defined benefit pension
scheme actuarial (loss)/gain (1.6) 2.0
Cash flow hedges and cost of hedging 3.1 0.2
Deferred tax on share schemes 0.2 0.1
-------------------------------------------------------------------- ----- -----
(3.3) 6.9
-------------------------------------------------------------------- ----- -----
Tax relating to components of other comprehensive income/(expense): (3.5) 6.8
Tax relating to share-based payments recognised directly
in equity: 0.2 0.1
-------------------------------------------------------------------- ----- -----
(3.3) 6.9
-------------------------------------------------------------------- ----- -----
HMRC had previously raised an enquiry into the structure used to
fund our overseas investment in the US business. Although a number
of earlier years were agreed, for the years ended 2019 onwards and
including the current period ended 31 December 2022, there is
uncertainty in connection with the applicability of the UK tax
rules to the structure which could lead to additional UK tax
payable. This is a complex area with a range of possible outcomes
and judgement has been used in calculating the provision. For these
reasons it cannot be known with certainty whether additional
amounts of UK tax will be due, however, we consider it is unlikely
that there will be material amounts due over and above the
provisions currently held.
In 2022 the tax risk provision was GBP1.0m (2021: GBP1.0m)
because it is considered likely that additional liabilities will
become due to the tax authorities.
6. 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, excluding own shares held.
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
GBPm 2022 2021
---------------------- ---- ----
Profit for the period 12.5 56.8
---------------------- ---- ----
Number of shares
'000 2022 2021
----------------------------------------------------- ------- -------
Weighted average number of Ordinary shares 577,576 579,426
Effect of potentially dilutive Ordinary shares 9,767 9,775
----------------------------------------------------- ------- -------
Weighted average number of Ordinary shares including
dilution 587,343 589,201
----------------------------------------------------- ------- -------
2022 2021
--------------------------- ---- ----
Basic earnings per share 2.2p 9.8p
Diluted earnings per share 2.1p 9.6p
--------------------------- ---- ----
The Group calculates Adjusted basic earnings per Ordinary share
and details of this can be found in Note 11, Alternative
performance measures.
7. Borrowings
The interest rates and currency profile of the Group's
borrowings at 31 December 2022 were as follows:
Amount
drawn
Facility down at
amount year end Non-utilisation Maturity
Currency GBPm GBPm Interest rate fee date
----------------------- --------- -------- --------- -------------------- --------------- -----------
SONIA(2) plus a
Term Loan GBP 225.0 225.0 margin of 2.1% N/A Mar 2026(1)
Revolving Credit SONIA(2) plus a
Facility ("RCF") GBP 230.0 60.0 margin of 2.1% 0.735% Mar 2026(1)
Fixed interest
Asset Finance Facility GBP 19.2 19.2 rate N/A Aug 2027
Fixed interest
Asset Finance Facility GBP 10.4 10.4 rate N/A Jun 2028
Asset Finance Facility USD 1.7 1.7 SOFR(3) plus 2.12% N/A Feb 2023
----------------------- --------- -------- --------- -------------------- --------------- -----------
Total 486.3 316.3(4)
---------------------------------- -------- --------- -------------------- --------------- -----------
1 GBP12.4m of the term loan and GBP12.6m of the RCF mature in
March 2024.
2 The interest rate for these facilities includes a Credit
Spread Adjustment following the transition from LIBOR to SONIA in
September 2021.
3 SOFR stands for Secured Overnight Financing Rate.
4 GBP316.3m represents the committed facilities of the Group,
the Group's Consolidated Statement of Financial Position discloses
GBP322.3m which includes local overdraft facilities, unamortised
fees and interest accrued.
On 18 March 2020, the Group completed a refinancing of its core
debt facilities through a new term loan and Revolving Credit
Facility totalling GBP455m. The refinancing resulted in the
addition of new lenders to the Group. The new facilities were due
to mature in March 2024, with an option to extend the tenure by a
further two years subject to lender approval. GBP430m of these
facilities were extended in March 2021 and further extended in
March 2022 to mature in March 2026.
The Group's total banking facilities amount to GBP455.0m (2021:
GBP455.0m) comprising:
a. GBP225.0m in term loans (2021: GBP225.0m term loan), with
GBP12.4m maturing in March 2024 and GBP212.6m in March 2026;
and
b. GBP230.0m Revolving Credit Facilities ("RCF") (2021:
GBP230.0m RCF), which includes an overdraft and money market
facility of GBP20.0m (2021: GBP20.0m) and further ancillary
facilities of GBP13.3m (2021: GBP13.3m). For the RCF, GBP12.6m
matures in March 2024 and GBP217.4m in March 2026. The bank
facilities are unsecured and are subject to covenant agreements
including the Group maintaining a minimum interest cover of 4.0x
and not exceeding an Adjusted leverage of 3.0x.
The Asset Finance Facility is made up of three separate
facilities which are secured against specific items of plant and
machinery as follows:
a. GBP25.0m facility, which could be drawn against up to August
2020, of which the Group initially drew down GBP24.9m with GBP19.2m
outstanding at the end of 2022. No further draw down can be made
against this facility. The facility has been drawn in tranches,
with each tranche being repaid on a quarterly basis over a period
of seven years, and the weighted average interest rate for the
facility at 31 December 2022 was 2.41% (2021: 2.41%). The interest
rate is fixed at the prevailing rate on commencement of the loan
tranche.
b. GBP13.1m drawn down during 2021 under a separate asset
financing facility with GBP10.4m outstanding at the end of 2022. No
further draw down can be made against this facility. The facility
has been drawn in tranches, with each tranche being repaid on a
monthly basis over a period of seven years, and the weighted
average interest rate for the facility at 31 December 2022 is 3.20%
(2021: 3.20%). The interest rate is fixed at the prevailing rate on
commencement of the loan tranche.
c. Bakkavor Foods USA Inc has entered into an asset financing
facility of up to $5.0m (GBP4.1m) of funding, based on approved
funding requests. As at 31 December 2022 GBP1.7m funding had been
approved and drawn and the interest rate for this was a variable
rate of SOFR plus 2.12%.
In September 2021 the Group transitioned from LIBOR to SONIA
which impacted GBP455.0m of the total debt facilities.
In addition, the Group has access to GBP8.9m (2021: GBP8.4m) of
local overdraft facilities in the US and China which are
uncommitted and unsecured. One of the Group's UK subsidiary
companies, Bakkavor Finance (2) Limited, has provided Corporate
Guarantees totalling $5m for the US local overdraft facility and
RMB 40m for the China local overdraft facility.
During the previous financial period, the Group repaid two term
loans with total capital repayments being GBP57.5m.
31 December 25 December
GBPm 2022 2021
--------------------------------------------------------- ----------- -----------
Bank overdrafts 8.2 -
Bank loans 314.1 320.6
--------------------------------------------------------- ----------- -----------
322.3 320.6
--------------------------------------------------------- ----------- -----------
Borrowings repayable as follows:
On demand or within one year 13.1 3.0
In the second year 16.1 2.9
In the third to fifth years inclusive 292.4 303.1
Over five years 0.7 11.6
--------------------------------------------------------- ----------- -----------
322.3 320.6
--------------------------------------------------------- ----------- -----------
Analysed as:
Amount due for settlement within 12 months (shown within
current liabilities) 13.1 3.0
Amount due for settlement after 12 months 309.2 317.6
--------------------------------------------------------- ----------- -----------
322.3 320.6
--------------------------------------------------------- ----------- -----------
2022 2021
% %
---------------------------------------------------------- ----- ----
The weighted average interest rates paid were as follows:
Bank loans and overdrafts 3.50 2.54
---------------------------------------------------------- ----- ----
Apart from the Asset Finance Facility, interest on the Group's
term loan and other borrowings are at floating rates, thus exposing
the Group to cash flow interest rate risk. This risk is mitigated
using interest rate swaps.
The fair value of the Group's borrowings is as follows:
31 December 25 December
GBPm 2022 2021
------------------------------------- ----------- -----------
Fair value of the Group's borrowings 324.5 323.8
------------------------------------- ----------- -----------
Net debt is the net 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 and is as follows:
31 December 25 December
GBPm 2022 2021
-------------------------- ----------- -----------
Analysis of net debt
Cash and cash equivalents 40.2 31.1
-------------------------- ----------- -----------
Borrowings (14.1) (4.1)
Interest accrual (0.4) (0.2)
Unamortised fees 1.4 1.3
Lease liabilities (11.3) (10.8)
-------------------------- ----------- -----------
Debt due within one year (24.4) (13.8)
-------------------------- ----------- -----------
Borrowings (310.4) (319.7)
Unamortised fees 1.2 2.1
Lease liabilities (85.9) (73.8)
-------------------------- ----------- -----------
Debt due after one year (395.1) (391.4)
-------------------------- ----------- -----------
Group net debt (379.3) (374.1)
-------------------------- ----------- -----------
8. Deferred tax
The following are the major deferred tax liabilities and assets
recognised by the Group and movements thereon during the current
and prior reporting period.
Retirement
benefit Overseas
Accelerated Fair obligations tax losses
tax value and share and accrued
GBPm depreciation(1) gains Provisions schemes interest US goodwill Total
------------------------------- ---------------- ------ ---------- ------------ ------------ ----------- ------
At 27 December 2020 (25.9) 0.2 0.5 (1.9) 28.9 (8.5) (6.7)
(Charge)/credit to income (13.8) 0.2 0.2 - (2.6) (0.8) (16.8)
Exchange differences (0.1) - - - (0.2) - (0.3)
Charge to equity and other
comprehensive
income - (0.2) - (6.7) - - (6.9)
------------------------------- ---------------- ------ ---------- ------------ ------------ ----------- ------
At 25 December 2021 (39.8) 0.2 0.7 (8.6) 26.1 (9.3) (30.7)
(Charge)/credit to income (6.3) (0.2) 0.2 0.5 3.4 (0.9) (3.3)
Credit to income on exceptional
items 4.7 - - - 1.0 - 5.7
Exchange differences (0.9) - - - 3.1 - 2.2
(Charge)/credit to equity and
other comprehensive income - (3.1) - 6.4 - - 3.3
------------------------------- ---------------- ------ ---------- ------------ ------------ ----------- ------
At 31 December 2022 (42.3) (3.1) 0.9 (1.7) 33.6 (10.2) (22.8)
------------------------------- ---------------- ------ ---------- ------------ ------------ ----------- ------
1 IAS23 Capitalised interest and Intangibles deferred tax
balances are shown within the Accelerated tax depreciation values
above.
Certain deferred tax assets and liabilities have been offset
where the Group has a legally enforceable right to do so. The
following is the analysis of the deferred tax balances (after
offset) for financial reporting purposes:
31 December 25 December
GBPm 2022 2021
------------------------- ----------- -----------
Deferred tax asset 12.9 9.9
Deferred tax liabilities (35.7) (40.6)
------------------------- ----------- -----------
(22.8) (30.7)
------------------------- ----------- -----------
Included in the above are deferred tax assets of GBP33.6m (2021:
GBP26.1) in connection with US tax losses and accrued interest
amounts which will be deductible in future accounting periods.
These deferred tax assets are offset by liabilities for which there
is a legally enforceable right to do so. The US tax losses and
accrued interest amounts can be carried forward indefinitely and
used against future US taxable profits.
The carrying amount of deferred tax assets is reviewed at each
statement of financial position date and reduced to the extent that
it is no longer probable that sufficient taxable profits will be
available to allow all or part of the asset to be recovered.
In evaluating whether it is probable that sufficient taxable
profits will be earned in future accounting periods, all available
evidence has been considered by management including forecasts and
business plans. These forecasts are consistent with those prepared
and used internally for business planning and impairment testing
purposes. Following this evaluation, management determined there
would be sufficient taxable profits generated to continue to
recognise these deferred tax assets in full.
Deferred tax assets in respect of some capital losses as well as
trading loses have not been recognised as their future recovery is
uncertain or not currently anticipated. The total gross deferred
tax assets not recognised are as follows:
31 December 25 December
GBPm 2022 2021
--------------- ----------- -----------
Capital losses 5.0 3.4
Trading losses 21.2 14.6
--------------- ----------- -----------
26.2 18.0
--------------- ----------- -----------
The capital losses arose in the UK and are available to carry
forward indefinitely but can only be offset against future capital
gains. The trading losses are non-UK losses and are available to
offset against future taxable profits. These losses are timebound
and GBP20.3m (2020: GBP13.5m) will expire after five years if
unused.
There are no deferred tax liabilities associated with
undistributed earnings of subsidiaries due to the availability of
tax credits against such liabilities or the exemption from UK tax
on such dividends.
Temporary differences arising in connection with interests in
associates are insignificant.
9. Called up share capital and dividends
Called up share capital
31 December 25 December
GBPm 2022 2021
----------------------------------------------------------- ----------- -----------
Issued and fully paid:
579,425,585 (2021: 579,425,585) Ordinary shares of GBP0.02
each 11.6 11.6
----------------------------------------------------------- ----------- -----------
All Ordinary shares of GBP0.02 each are non-redeemable, and
carry equal voting rights and rank for dividends and capital
distributions, whether on a winding up or otherwise.
Own shares held
During the period, the Company began purchasing shares through
an Employee Benefit Trust called the Bakkavor Group plc Employee
Benefit Trust (the "Trust"). Own shares purchased are recorded at
cost and deducted from equity.
The own shares held represents the cost of shares in Bakkavor
Group plc purchased in the market and held by the Trust to satisfy
share awards under the Group's share scheme plans.
The number of Ordinary shares held by the Trust at 31 December
2022 was 2,940,514 (25 December 2021: nil). This represents 0.51%
of total called up share capital at 31 December 2022 (25 December
2021: nil).
Total cash purchases made through the EBT during the year
amounted to GBP3.1m (2021: GBPnil).
Number
GBPm of shares GBP000
------------------------------------------------ ---------- ------
Balance at 26 December 2021 - -
Acquisition of shares by the Trust 2,994,036 3,128
Distribution of shares under share scheme plans (53,522) (54)
------------------------------------------------ ---------- ------
Balance at 31 December 2022 2,940,514 3,074
------------------------------------------------ ---------- ------
No own shares held of Bakkavor Group plc were cancelled during
the periods presented.
Dividends
At the AGM on 20 May 2021, a deferred final dividend of 4 pence
per Ordinary share for the financial year ended 28 December 2019
was reinstated and declared. The total amount of GBP23,177,023 was
paid to Ordinary shareholders on 25 May 2021.
An interim dividend of 2.64 pence per Ordinary share was
declared in September 2021. The total amount of GBP15,296,835 was
paid to Ordinary shareholders on 15 October 2021.
At the AGM on 25 May 2022, a final dividend of 3.96 pence per
Ordinary share for the financial year ended 25 December 2021 was
declared. Following a waiver in relation to 2,439,135 Ordinary
shares held in the Bakkavor Group plc Employee Benefit Trust,
GBP22,848,663 was paid to Ordinary shareholders on 30 May 2022.
An interim dividend of 2.77 pence per Ordinary share was
declared in September 2022. Following a waiver in relation to
2,492,273 Ordinary shares held in the Bakkavor Group plc Employee
Benefit Trust, GBP15,981,053 was paid to Ordinary shareholders on
14 October 2022.
This has resulted in total dividend payments of GBP38,829,716
(2021: GBP38,473,858) during the year.
A final dividend of 4.16 pence per share has been proposed for
approval at the Annual General Meeting on 31 May 2023 and will be
payable on 5 June 2023 to Ordinary shareholders on the register at
28 April 2023.
10. Net cash generated from operating activities
GBPm 2022 2021
---------------------------------------------------------- ------ ------
Operating profit 37.8 102.0
Adjustments for:
Share of results of associates after tax (0.2) (0.3)
Depreciation of property, plant and equipment 68.3 65.2
Amortisation of intangible assets 0.7 0.5
Profit on disposal of property, plant and equipment (0.1) (2.9)
Impairment of assets 29.2 1.3
Share scheme charges 1.3 1.7
Net retirement benefits charge less contributions (2.2) (1.4)
---------------------------------------------------------- ------ ------
Operating cash flows before movements in operating assets
and liabilities 134.8 166.1
(Increase) in inventories (15.8) (7.0)
(Increase) in receivables (17.3) (6.2)
Increase in payables 32.8 18.9
Increase/(decrease) in exceptional provisions(1) 18.4 (0.4)
(Decrease) in provisions (1.4) (2.9)
---------------------------------------------------------- ------ ------
Cash generated by operations 151.5 168.5
Income taxes paid (5.1) (6.5)
Interest paid (19.3) (18.0)
---------------------------------------------------------- ------ ------
Net cash generated from operating activities 127.1 144.0
---------------------------------------------------------- ------ ------
1 Included within the increase in exceptional provisions are
inventory and receivable provision movements of GBP3.3m (2021:
GBPnil).
Analysis of changes in net debt
Other
26 December Cash Lease Exchange non-cash 31 December
GBPm 2021 flow additions movements movements(1) 2022
--------------------------------- ----------- ----- ---------- ---------- ------------- -----------
Borrowings (320.6) (0.5) - (0.2) (1.0) (322.3)
Lease liabilities (84.6) 14.0 (25.6) (1.0) - (97.2)
--------------------------------- ----------- ----- ---------- ---------- ------------- -----------
Total liabilities from financing
activities (405.2) 13.5 (25.6) (1.2) (1.0) (419.5)
Cash and cash equivalents 31.1 8.0 - 1.1 - 40.2
--------------------------------- ----------- ----- ---------- ---------- ------------- -----------
Net debt (374.1) 21.5 (25.6) (0.1) (1.0) (379.3)
--------------------------------- ----------- ----- ---------- ---------- ------------- -----------
Other
27 December Cash Lease Exchange non-cash 25 December
GBPm 2020 flow additions movements movements(1) 2021
--------------------------------- ----------- ----- ---------- ---------- ------------- -----------
Borrowings (354.6) 32.8 - - 1.2 (320.6)
Lease liabilities (82.0) 11.7 (14.2) (0.1) - (84.6)
--------------------------------- ----------- ----- ---------- ---------- ------------- -----------
Total liabilities from financing
activities (436.6) 44.5 (14.2) (0.1) 1.2 (405.2)
Cash and cash equivalents 24.8 6.1 - - 0.2 31.1
--------------------------------- ----------- ----- ---------- ---------- ------------- -----------
Net debt (411.8) 50.6 (14.2) (0.1) 1.4 (374.1)
--------------------------------- ----------- ----- ---------- ---------- ------------- -----------
1 Includes accrued interest at 31 December 2022 of GBP0.4.m
(2021: GBP0.2m) and prepaid bank fees of GBP2.6m (2021: GBP3.4m).
The net reduction in these balances in the period of GBP1.0m (2021:
net increase of GBP1.2m) is shown in the table above as 'Other
non-cash movements' in Borrowings.
11. 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.
They 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 revenue
The Group defines like-for-like 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,
the effect of foreign currency movements and revenues. In addition
revenues for week 53 are taken out in the relevant financial years
to ensure that like-for-like revenue is shown on a 52 week basis
each year.
The following table provides the information used to calculate
like-for-like revenue for the Group.
Change
GBPm 2022 2021 %
----------------------------- ------- ------- ------
Statutory revenue 2,139.2 1,871.6 14.3%
Effect of currency movements (34.2) -
Week 53 revenue (36.0) -
----------------------------- ------- ------- ------
Like-for-like revenue 2,069.0 1,871.6 10.6%
----------------------------- ------- ------- ------
The following tables provide the information used to calculate
like-for-like revenue for each segment.
UK
Change
GBPm 2022 2021 %
---------------------- ------- ------- ------
Statutory revenue 1,783.1 1,592.4 12.0%
Week 53 revenue (30.8) -
---------------------- ------- ------- ------
Like-for-like revenue 1,752.3 1,592.4 10.0%
---------------------- ------- ------- ------
US
Change
GBPm 2022 2021 %
----------------------------- ------ ----- ------
Statutory revenue 255.3 180.1 41.8%
Effect of currency movements (25.5) -
Week 53 revenue (3.6) -
----------------------------- ------ ----- ------
Like-for-like revenue 226.2 180.1 25.6%
----------------------------- ------ ----- ------
China
Change
GBPm 2022 2021 %
----------------------------- ----- ---- ------
Statutory revenue 100.8 99.1 1.7%
Effect of currency movements (8.7) -
Week 53 revenue (1.6) -
----------------------------- ----- ---- ------
Like-for-like revenue 90.5 99.1 (8.6)%
----------------------------- ----- ---- ------
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. In calculating Adjusted operating
profit, we exclude restructuring costs, asset impairments, costs
incurred to configure or customise 'software as a service' ('SaaS')
arrangements, and those additional charges or credits that are
considered significant or one-off in nature. In addition, for
Adjusted EBITDA we exclude depreciation, amortisation, the share of
results of associates after tax and share scheme charges, as these
are non-cash amounts. Adjusted operating profit margin is used as
an additional profit measure that assesses profitability relative
to the revenues generated by the relevant segment; it is calculated
by dividing the Adjusted operating profit by the statutory revenue
for the relevant segment.
SaaS arrangements are service contracts providing the Group with
the right to access the cloud provider's application software over
the contract period. Costs incurred to configure or customise, and
the ongoing fees to obtain access to the cloud provider's
application software, are recognised as operating expenses when the
services are received, unless the configuration and customisation
activities significantly modify or customise the cloud software, in
which case the costs are expensed over the SaaS contract term. The
Group adjusts for the cost of these projects as they are infrequent
in nature and relate to significant systems changes within the
business.
The Group calculates Adjusted EBITDA on a pre-IFRS 16 basis for
the purposes of determining covenants under its financing
agreements.
The following table provides a reconciliation from the Group's
operating profit to Adjusted operating profit and Adjusted
EBITDA.
GBPm Note 2022 2021
---------------------------------------------------- ---- ------ ------
Operating profit 37.8 102.0
Exceptional items 3 50.1 -
Configuration and customisation costs for SaaS
projects 1.5 -
---------------------------------------------------- ---- ------ ------
Adjusted operating profit 89.4 102.0
Depreciation 68.3 65.2
Amortisation 0.7 0.5
Share scheme charges 1.9 2.3
Profit on disposal of property, plant and equipment (0.1) (2.9)
Share of results of associates after tax (0.2) (0.3)
---------------------------------------------------- ---- ------ ------
Adjusted EBITDA post IFRS 16 160.0 166.8
Less IFRS 16 impact (13.8) (12.6)
---------------------------------------------------- ---- ------ ------
Adjusted EBITDA pre IFRS 16(1) 146.2 154.2
Covenant adjustments 0.6 1.4
---------------------------------------------------- ---- ------ ------
Adjusted EBITDA (pre IFRS 16 and including covenant
adjustments) 146.8 155.6
---------------------------------------------------- ---- ------ ------
1 Excludes the impact of IFRS 16 as the Group's bank facility
agreement definition of Adjusted EBITDA excludes the impact of this
standard.
Adjusted EBITDA and Adjusting operating profit by segment is
reconciled to operating profit in Note 2.
Operational net debt and leverage
Operational net debt excludes the impact of non-cash items on
the Group's net debt. 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 and aligns with the
definition of net debt in the Group's bank facility agreements
which exclude the impact of IFRS 16. The following table sets out
the reconciliation from the Group's net debt to the Group's
operational net debt.
31 December 25 December
GBPm Note 2022 2021
---------------------------------------------------- ---- ----------- -----------
Group net debt 7 (379.3) (374.1)
Unamortised fees (2.6) (3.4)
Interest accrual 0.4 0.2
Lease liabilities recognised under IFRS 16 96.6 83.6
---------------------------------------------------- ---- ----------- -----------
Group operational net debt (284.9) (293.7)
---------------------------------------------------- ---- ----------- -----------
Adjusted EBITDA (pre IFRS 16 and including covenant
adjustments) 146.8 155.6
Leverage (Operational net debt/Adjusted EBITDA
pre IFRS 16 and including covenant adjustments) 1.9 1.9
---------------------------------------------------- ---- ----------- -----------
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), but before payments of
refinancing fees and other exceptional or significant non-recurring
cash flows. Free cash flow has benefitted from non-recourse
factoring of receivables and the extension of payment terms for
certain suppliers. 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.
GBPm 2022 2021
------------------------------------------------------ ------ ------
Net cash generated from operating activities 127.1 144.0
Interest received 0.2 -
Dividends received from associates - 0.7
Purchases of property, plant and equipment (61.1) (59.8)
Proceeds on disposal of property, plant and equipment 0.1 4.2
Purchase of intangibles (2.9) -
Cash impact of exceptional items 2.5 1.2
Refinancing fees 0.9 0.9
------------------------------------------------------ ------ ------
Free cash flow 66.8 91.2
------------------------------------------------------ ------ ------
Adjusted 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 for the period adjusted to exclude exceptional
items, configuration and customisation costs for SaaS projects and
the change in value of derivative financial instruments. The
following table reconciles profit for the period to Adjusted
earnings.
For Adjusted diluted earnings per share, the weighted average
number of Ordinary shares in issue is adjusted to assume conversion
of all potentially dilutive Ordinary shares.
GBPm 2022 2021
---------------------------------------------------------- ----- -----
Profit for the period 12.5 56.8
Exceptional items (Note 3) 50.1 -
Configuration and customisation costs for SaaS projects 1.5 -
Change in fair value of derivative financial instruments 0.1 4.0
Tax on the above items (9.4) (0.8)
---------------------------------------------------------- ----- -----
Adjusted earnings 54.8 60.0
Add back: Tax on Adjusted profit before tax 15.0 25.4
---------------------------------------------------------- ----- -----
Adjusted profit before tax 69.8 85.4
---------------------------------------------------------- ----- -----
Effective tax rate on underlying activities
(Tax on Adjusted profit before tax/Adjusted profit before
tax) 21.5% 29.7%
---------------------------------------------------------- ----- -----
Number of shares
'000 2022 2021
--------------------------------------------------- ------- -------
Weighted average number of Ordinary shares 577,576 579,426
Effect of dilutive Ordinary shares 9,767 9,775
--------------------------------------------------- ------- -------
Weighted average number of diluted Ordinary shares 587,343 589,201
--------------------------------------------------- ------- -------
2022 2021
------------------------------------ ---- -----
Adjusted basic earnings per share 9.5p 10.4p
------------------------------------ ---- -----
Adjusted diluted earnings per share 9.3p 10.2p
------------------------------------ ---- -----
Return on Invested Capital ("ROIC")
The Group defines ROIC as Adjusted operating profit after tax
divided by the average invested capital for the year. Adjusted
operating profit after tax is defined as operating profit excluding
the impact of exceptional items and configuration and customisation
costs for SaaS projects at the Group's effective tax rate. Invested
capital is defined as total assets less total liabilities excluding
net debt at the period end, pension assets and liabilities (net of
deferred tax) and fair values for derivatives not designated in a
hedging relationship. The Group utilises ROIC to measure how
effectively it uses invested capital. Average invested capital is
the simple average of invested capital at the beginning and end of
the period.
The Directors believe that ROIC is a useful indicator of the
amount returned as a percentage of shareholders' invested capital
and that ROIC can help analysts, investors and stakeholders to
evaluate the Group's profitability and the efficiency with which
its invested capital is employed.
The following table sets out the calculations of Adjusted
operating profit after tax and invested capital used in the
calculation of ROIC.
GBPm Note 2022 2021
---------------------------------------------------- ---- ------- -------
Operating profit 37.8 102.0
Exceptional items 3 50.1 -
Configuration and customisation costs for SaaS
projects 1.5 -
---------------------------------------------------- ---- ------- -------
Adjusted operating profit 89.4 102.0
Taxation at the underlying effective rate (19.2) (30.3)
---------------------------------------------------- ---- ------- -------
Adjusted operating profit after tax 70.2 71.7
---------------------------------------------------- ---- ------- -------
Invested capital
Total assets 1,541.4 1,503.5
Total liabilities (923.6) (862.8)
Net debt at period end 379.3 374.1
Derivatives not designated as hedges - 0.9
Retirement benefit scheme surplus (12.8) (37.2)
Deferred tax liability on retirement benefit scheme 3.2 9.3
---------------------------------------------------- ---- ------- -------
Invested capital 987.5 987.8
---------------------------------------------------- ---- ------- -------
Average invested capital for ROIC calculation 987.7 994.4
---------------------------------------------------- ---- ------- -------
ROIC (%) 7.1% 7.2%
---------------------------------------------------- ---- ------- -------
12. Statement of directors' responsibilities in respect of the
financial statements
We confirm to the best of our knowledge that:
-- The Group Financial Statements, which have been prepared in
accordance with UK-adopted International Accounting Standards, give
a true and fair view of the assets, liabilities, financial position
and profit of the Group; and
-- The announcement includes a fair review of the development
and performance of the business and the position of the Group,
together with a description of the principal risks and
uncertainties that it faces.
Approved on behalf of the Group Board by:
Mike Edwards Ben Waldron
Chief Executive Officer Chief Financial Officer and Asia Chief
Executive Officer
7 March 2023
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END
FR JRMRTMTAMBRJ
(END) Dow Jones Newswires
March 08, 2023 02:00 ET (07:00 GMT)
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