28th Feb 2019 09:07
LONDON (Alliance News) - Bakkavor Group PLC shares tumbled on Thursday as the company warned its 2019 performance will be flat on 2018.
The fresh food supplier achieved a rise in profit and revenue in 2018, despite "challenging" market conditions in the UK.
Shares in Bakkavor were down 14% Thursday morning at 139.40 pence each, amongst the worst performers in London's mid-cap index.
In 2018, Bakkavor doubled its pretax profit to GBP77.9 million from GBP39.0 million in 2017, as finance costs in 2018 decreased to GBP13.2 million from GBP35.0 million in 2017.
Bakkavor's revenue increased 2.8% to GBP1.86 billion, with like-for-like revenue up 3.4% to GBP1.84 billion from GBP1.78 billion.
The company said it produced a "robust performance" in 2018 "given the continued challenging market conditions in the UK, especially the high levels of inflation and weak consumer confidence".
Its UK business reported a revenue increase of 1.1% to GBP1.65 billion. Bakkavor's International business posted a 16% increase in revenue to GBP201.6 million.
The UK business was helped by the football world cup and royal wedding in the summer but saw consumer confidence "noticeably weaken" from September. Bakkavor said market growth was limited in the second half but the unit secured "a number" of business wins in its core categories.
The International unit - consisting of operations in the US and China - saw its growth stunted primarily due to the start-up and pre-commissioning of factories in both regions, combined with disruption costs as Bakkavor repurposed part of an existing US site to "capitalise on the growing prepared meals market".
Bakkavor declared a total dividend of 6 pence for 2018 having not paid anything in 2017 and said it intends to maintain a "progressive" dividend policy in the medium term.
Looking towards 2019, Bakkavor expects the same pressures experienced in the second half of 2018 to continue in the current year.
"Subdued consumer confidence and inflationary pressures have continued into 2019, and therefore we remain cautious and expect little improvement in underlying market conditions," said Chief Executive Agust Gudmundsson.
"Consequently, we expect limited growth in the UK and a corresponding decline in the group's earnings before interest, tax, depreciation and amortisation margin in the first half of the year."
"However, in the second half, we anticipate an uplift in UK revenues as we benefit from recently secured new business. Given this additional volume, together with the actions we are taking to protect profitability, we expect a significant improvement in our trading in the second half of the year and our full year group performance to be broadly in line with 2018," Gudmundsson continued.
"Looking further ahead, we remain confident that our strategy, combined with our scale and expertise leaves us well-placed to capitalise on further growth opportunities within the attractive fresh prepared food market, both in the UK and overseas."
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