Bakkavor Profit Drops on U.K. Site Closure; Sales Rise

Bakkavor Group plc, the leading provider of fresh prepared food in the UK, reported a mixed set of financial results for the year ended 28 December 2024. While the company saw a rise in sales, profit took a hit due to the closure of two UK sites. The company's shares fell 5.65% to 151.08p following the announcement.

Bakkavor's like-for-like (LFL) revenue increased by 5.1% to £2.3 billion, with reported revenue up 4.0% to £2.29 billion. The UK operations contributed to the majority of the growth, with LFL revenue up 5.2% to £1.948.5 billion. However, the US segment saw a slight decline in LFL revenue, down 0.7% to £227.7 million, while the China segment saw a 4.3% decrease in LFL revenue to £116.5 million.

The company attributed the decline in profit to the closure of two UK sites, Bakkavor Salads in Sutton Bridge, Lincolnshire, and Bakkavor Desserts in Leicester. These closures resulted in a £15 million annualised impact on the company's National Insurance contributions, which was partially offset by price recovery and efficiency improvements.

Bakkavor's CEO, Mike Edwards, commented on the results: "We delivered a strong performance in 2024 as we continue rebuilding our margin and strengthening our balance sheet. Throughout the year, we have delivered excellent quality, service, and innovation for our customers, culminating in exceptional delivery of our Christmas peak. I would like to thank all colleagues for their commitment, energy, and drive, which has been fundamental to our delivery. Our improved financial performance will help us continue to invest in our business and our people."



Bakkavor anticipates that its adjusted operating profit for the year will be at least in line with the upper end of market expectations, which range from £108.0 million to £111.5 million. The company also expects its operational net debt to have been reduced further in the second half of the year, with leverage improved and expected to be towards the bottom-end of its target range (1.0x - 2.0x).

The closure of the two UK sites is expected to have a positive impact on Bakkavor's overall operational efficiency and cost structure. However, the potential long-term effects on the company's UK market share and customer relationships remain a concern. The closures may lead to a loss of market share to competitors who are better equipped to handle increased demand, as well as a potential impact on Bakkavor's ability to maintain strong relationships with its customers.

In conclusion, Bakkavor's financial results for 2024 reflect a mixed performance, with strong sales growth offset by a decline in profit due to the closure of two UK sites. The company remains confident in its ability to deliver against its strategy and drive adjusted operating profit margin to 6% in the medium term. However, the potential long-term effects of the closures on the company's UK market share and customer relationships warrant close monitoring.