Annual Financial Report

RNS Number : 3417V

Bakkavor Group PLC

08 April 2019

 

8 April 2019

Bakkavor Group plc

2018 Annual Report and Accounts and Notice of 2019 Annual General Meeting

Bakkavor Group plc ('the Company') announces that it has today published its 2018 Annual Report and Accounts and Notice of 2019 Annual General Meeting. The following documents are being made available to shareholders electronically today, Monday 8 April 2019:

·      2018 Annual Report and Accounts

·      Notice of 2019 Annual General  Meeting

(together "the Documents")

In compliance with Listing Rule 9.6.1, copies of the Documents will be submitted to the National Storage Mechanism and will shortly be available on its website: http://www.morningstar.co.uk/uk/

The documents will also be available to view and download shortly from the Company's website: https://www.bakkavor.com/investor-relations  and printed copies of the documents will be available from the Registered Office of the Company from 18 April 2019.

The Company's 2019 Annual General Meeting will be held at 9.30am on Thursday 23 May 2019 at Bakkavor's Registered Office, Fitzroy Place, 5th Floor, 8 Mortimer Street, London, W1T 3JJ.

In compliance with the information required pursuant to Rule 6.3.5 of the UK Disclosure Guidance and Transparency Rules ("DTR"), the following information about the Company and its subsidiaries ("the Group") is extracted from the Company's 2018 Annual Report and should be read in conjunction with the Company's Full Year 2018 results announcement issued on 28 February 2019. Together, these constitute the information required by DTR 6.3.5 to be communicated to the media in full text through a Regulatory Information Service.  This information is not a substitute for reading the Company's Annual Report in full.

 

STATEMENT OF DIRECTORS' RESPONSIBILITIES

The Directors confirm that to the best of their knowledge:

·     The Financial Statements, prepared in accordance with the relevant financial reporting framework, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Group and the Company and the undertakings included in the consolidation taken as a whole;

·     The Strategic Report includes a fair review of the development and performance of the business and the position of the Group and the Company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face; and

·     The Annual Report and Financial Statements, taken as a whole, are fair, balanced and understandable and provide the information necessary for shareholders to assess the Group and Company's performance, business model and strategy.

This responsibility statement has been approved by the Directors of the Company and signed on its behalf on 5 April 2019 by Agust Gudmundsson, Chief Executive Officer.
 

RELATED PARTY TRANSACTIONS

Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosed in this note. Transactions between the Company and its subsidiaries and associates are disclosed in the Company's separate Financial Statements.
 

Trading transactions

During the period, Group companies did not enter into any transactions with related parties who are not members of the Group.

PRINCIPAL RISKS AND UNCERTAINTIES

Risk area	Risk description	Mitigating controls	Risk Trend 2018
Food safety and integrity	Millions of people eat our products every day. We have a duty to make food that is safe and is clearly and correctly labelled. Consumer safety and confidence are vital to our business; any issue that breaches that trust could result in loss or reduction of customer business and also impact our credibility and reputation.	Stringent food safety policies in place throughout the organisation and use of Hazard Analysis Critical Control Point principles to identify and control food safety risks. Employees trained against documented procedures. Food safety controls regularly audited by internal and external parties. Emerging risks monitored by working with industry and regulatory bodies. Food safety audits conducted for new suppliers with, regular audits of existing suppliers. Regular reporting of food safety performance to the Board and immediate reporting of significant issues.	The level of risk has remained unchanged.
Raw material and input cost inflation	The Group's cost base and margin are vulnerable to fluctuations in the price and availability of raw materials, packaging materials and freight. Ability to pass on any increases in these costs to customers within a reasonable timeframe is a challenge and failure to do so could impact the Group's profitability and hence its ability to continue to invest in the business.	Central procurement team focused on achieving a balance between price, quality, availability and service levels. Forward purchasing agreed and price variations passed on where possible. Agreements in place with some customers on recovery of raw material cost impacts. Continued focus on cost reduction and productivity enhancements.	The risk has marginally increased due to ongoing uncertainty around Brexit.
Reliance on a small number of key customers	We work with four of the largest food retailers in the UK and a significant proportion of our revenue is from these customers. Any major customer loss would have a significant negative impact on our business.	Partnership model in place with customers. In the UK, customer-specific champions and teams manage strategic customer relationships. Relationships with all grocery retailers beyond the four largest gives breadth of cover. Strong reputation for food safety and quality. Reputation amongst customers for strong insights and innovation capabilities. Significant investment in manufacturing facilities and highly complex 'just in time' manufacturing process.	Customer concentration has remained unchanged.
Manpower scarcity and costs	Manpower scarcity and higher labour costs could affect the Group's business and future profitability. The Group competes with other manufacturers for good and reliable employees. The supply of such employees is limited and competition to hire and retain them may result in higher labour costs. Additionally, for the Group's UK operations, Brexit presents a risk as historically the Group has employed a material number of citizens from elsewhere in the European Union.	Specific campaigns and focus groups in place targeting recruitment of future employees and building attractiveness of careers in the food industry. Initiatives in place to enhance and upgrade factory site facilities to help attract and retain employees. Central staff dedicated to recruitment and management of staff costs. Initiatives in place to support employees with Brexit-related concerns.	Brexit concerns have increased the risk.
IT systems and cyber risk	Unauthorised access of the Company's Information Technology ("IT") systems could lead to breaches of data protection and release of market sensitive information. Any breakdown or failure in the Group's IT infrastructure or the Group's communication networks, including malicious cyber-attacks by third parties, could delay or otherwise impact the Group's day-to-day business.	Group Information Systems ("IS") manage access to business data in the UK through strong password protection, role-based access to business systems and policies to ensure appropriate use. The Group IS department has delivered Disaster Recovery ("DR") for all critical systems in the UK and is working towards delivering DR for other important systems. Group IS has strict policies and actively ensures UK IS infrastructure and equipment are sufficiently protected against malicious cyber attacks. Local teams in the US and China are developing our IS infrastructure capabilities.	Cyber threats have become more common in the wider economy. Whilst the Group has increased investment in this area, overall the risk has marginally increased.
Health and safety	We understand our duty of care to secure and protect the health and safety ("H&S") of our employees and to reduce the environmental impact of our operations. Failure to maintain the H&S of employees could have a significant reputational impact and also have serious legal consequences.	H&S and environmental impacts are managed locally by our teams and managed by the Group's in-house experts who embed and monitor practices. Stringent processes are implemented for identifying and managing H&S and environmental risks. Regular reporting of H&S Key Performance Indicators to the Group Board and immediate reporting of significant issues. Culture of employee engagement around accident prevention across the Group.	The level of risk has remained unchanged.
Investment and development​	Much of our future growth will be delivered from new factory builds and acquisitions. This adds a level of execution risk to continuing operations.​	Detailed planning and sharing of best practice within the Group minimises risk.​	Increased investment in development projects has increased execution risk.
Liquidity, interest rates, exchange rates and covenant compliance	To achieve our growth objectives, we require a strong financial platform. The Group has significant facilities governed by financing agreements under which we are subject to various financial covenants and undertakings. Breaching any covenant would impair our ability to maintain existing financing and secure future financing, thereby destabilising the business.	Financial results, projections and covenant performance reviewed regularly. Open and regular dialogue with our lenders and an active investor engagement programme. Treasury function operates within framework of strict Group Board-approved policies and procedures. Active foreign exchange hedging programme maintained. Active policy of hedging known non-sterling denominated expenditure both for specific projects and on a rolling basis for material purchases.	Liquidity metrics have remained unchanged.
Brexit disruption	It is possible that the way in which Brexit is delivered will result in disruption at the UK ports leading to increasing costs and availability problems, especially with short life raw materials, which ultimately might impact sales volumes.	We have recently obtained AEO status which should help us streamline and simplify our import processes. Longer-life packaging and raw material stocks will be increased as necessary.	Current uncertainty regarding the outcome of Brexit has increased the risk.​
Disruption to Group operations	Catastrophic damage to one of our food factories by fire, flood or IS disruption would interrupt supplies.​	Building and property management protocols are employed and audited in conjunction with our property insurers. Business continuity plans are in place and for many products alternative Bakkavor factories could supply in the event of a major issue.​	The level of risk has remained unchanged.
Sustainability	To continue with our growth agenda we must ensure that the business is developing in a sustainable way.​	We are increasing our focus and monitoring of performance and development in relation to carbon, waste, water, plastics and responsible sourcing.​	Increased pressure from our customers and consumers to demonstrate sustainability has increased the risk.
Consumer behaviour and demand​	Changes in consumer demand due to a serious change in the UK economy or other consumption factors could impact our plans. ​	We work closely with our customers to adapt to changing consumer trends.​	Higher prices arising from weaker sterling and changing demand focus has increased risk.
Competitors ​	The Group operates in a highly competitive market.​	Developing and maintaining strong working relationships with our customers underpinned by high service levels and constant product development and innovation. ​	The level of risk has remained unchanged.

ENQUIRIES:

Simon Witham, General Counsel and Company Secretary                         [phone]

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ABOUT BAKKAVOR

Bakkavor is the leading provider of fresh prepared food ("FPF") in the UK, with a growing international presence in the United States and China. The Group is the number one by market share in the UK in the four FPF product categories of Meals, Salads, Desserts and Pizza & Bread, providing high-quality, fresh, healthy and convenient food. Its customers include all the well-known UK grocery retailers as well as some of the world's best-known international food brands.

The Group's International segment operates in the US and China. As these FPF markets continue to grow, Bakkavor seeks to leverage its UK expertise in order to build its presence in these territories.

Bakkavor was founded in 1986 and has its headquarters in London. The Group has over 19,000 employees and operates 25 factories in the UK, 5 in the US and 9 in China.

LEI number: 213800COL7AD54YU9949

 

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