Agust Bakkavor

Agust Gudmundsson

Bakkavor has reported a strong set of annual results for 2021 despite the triple threat of supply chain constraints, labour shortages and cost inflation.

The fresh prepared specialist reported that revenue for the year is up 4.4 per cent compared to 2020, and on a like-for-like basis, revenue rose 6.2 per cent compared to 2020 and 1.2 per cent compared to 2019.

Operating margin is expected to be at the top end of the range of current market expectations at 5-5.2 per cent, which the company said 'reflects the group’s scale and category leadership, strong relationships and strict focus on cost control, all of which helped to mitigate cost inflation and labour shortages, as well as drive year-on-year efficiency improvements.'

UK recovery driven by strong demand, but salads struggle

Bakkavor said it had seen strong sales momentum in the UK as lockdown restrictions eased and frequency of shopping visits returned, adding that it has delivered 'an exciting range of innovative new products for our customers to support the reinvigoration of our categories and this will continue to drive growth.'

All categories, except for salads, were in growth compared to 2019, driven by strong underlying performance, new product launches and seasonal events. While salads volumes were more severely impacted by lockdown restrictions and subsequently constrained by labour availability through the summer peak, Bakkavor reported the category recovery improving through the year.

Overall the UK saw like-for-like sales increase by 2.9 per cent compared to 2020, but they were down by 2.3 per cent compared to 2019.

'Operationally, our key focus is on managing the ongoing industry-wide challenges, and mitigating the consequential inflationary headwinds, which intensified in the fourth quarter of 2021,' the company said. 'Existing raw material pass-through mechanisms are working effectively, and we have received support from our customers in dealing with inflationary pressures outside of these models.

'This, combined with our relentless focus on efficiency improvement and cost control, means we have largely mitigated the impact of inflation in 2021.'

International progress

In the US, Bakkavor reported that like-for-like revenue increased 31.8 and 48.4 per cent compared to 2020 and 2019 respectively.

And in China, despite regional restrictions impacting volumes, like-for-like revenue grew 24.6 per cent compared to 2020, but was still down 2.4 per cent against 2019.

Chief executive Agust Gudmundsson said: 'We are pleased to see continued growth and strategic progress across the group, despite unprecedented industry-wide challenges. The group’s strong performance and ongoing commitment to delivering for our customers is testament to the resilience of our business model and the dedication of our colleagues.

'We have continued to leverage our scale, category leadership and expertise – together with our strengthened financial position – enabling us to successfully navigate these challenges and emerge in a position of strength.

“We have confidence in our ability to continue to build on the positive revenue momentum through 2022 as demand for our fresh, convenient, and innovative products remains strong. The significant challenges facing our industry are, however, persisting; we remain focused on mitigating the impact, as well as managing the current heightened uncertainty associated with the Omicron Covid-19 variant. Looking forward, we remain positive about the medium-term growth opportunity and believe the group is well placed to deliver enhanced returns for shareholders.”