Bakkavor’s Strategic Turnaround and Margin Expansion: A High-Conviction Play in 2025

Bakkavor Group’s 2025 transformation has emerged as a compelling case study in strategic reinvention. By combining disciplined margin expansion with targeted divestitures, the company has not only exceeded expectations but also signaled a re-rating of its valuation potential. According to a report by Investing.com, Bakkavor’s adjusted operating profit for Q2 2025 surged 9.8% year-on-year to £61.5 million, with operating margins expanding by 50 basis points to 5.7% [1]. This outperformance, driven by its U.S. division’s 260-basis-point margin improvement, underscores the effectiveness of its cost-optimization and pricing strategies.

The company’s strategic exit from China, completed in July 2025, further exemplifies its focus on core markets. Bakkavor sold its China operations to Lihe Xing (Qingdao) Food Technology Co. Ltd. for £50 million in cash, generating a net profit of at least £18 million [3]. This move reduced leverage to 1.1x, aligning with its medium-term goal of achieving a 6% operating margin—now accelerated to 2026 [2]. The proceeds from the divestiture will be reinvested into high-growth areas, such as its U.S. business, which has become a key driver of profitability.

Bakkavor’s margin expansion is not merely operational but structural. Its Q1 2025 trading update highlighted a “clear focus on improving margins” through supply-chain rationalization and product mix optimization [1]. The U.S. division’s 7.6% revenue growth in Q2 2025, coupled with its accretive margin contribution, demonstrates the scalability of these initiatives. Analysts at Marketscreener note that the company’s upgraded full-year guidance reflects confidence in sustaining this momentum [2].

The broader convenience food sector is also witnessing consolidation, with Greencore Group PLC’s planned acquisition of Bakkavor under regulatory review. While the deal is expected to close in early 2026, Greencore’s Q3 FY25 results—showing a 9.9% revenue increase to £511.1 million—highlight the sector’s resilience and the potential for synergies [4]. This context reinforces Bakkavor’s position as a strategic asset, with its margin discipline and geographic focus making it an attractive target.

For investors, Bakkavor’s trajectory represents a high-conviction opportunity. Its accelerated margin target, combined with a deleveraged balance sheet and a clear strategic vision, positions it to outperform in a sector where operational efficiency is paramount. As the company navigates its next phase of growth, the re-rating of its valuation appears well justified.

Source:
[1] Bakkavor raises profit forecast as U.S. growth drives strong H1 results [https://www.investing.com/news/earnings/bakkavor-raises-profit-forecast-as-us-growth-drives-strong-h1-results-4220660]
[2] Bakkavor : Half Year Results 2025 Report [https://www.marketscreener.com/news/bakkavor-half-year-results-2025-report-ce7d59dadd8ff126]
[3] Bakkavor completes sale of China operations [https://www.bakkavor.com/en/investors/regulatory-news/News-Details/2025/Bakkavor-completes-sale-of-China-operations/default.aspx]
[4] Greencore Reports Strong Performance For Q3 and Updates on Bakkavor Acquisition [https://uk.advfn.com/market-news/article/2350/greencore-reports-strong-q3-performance-and-updates-on-bakkavor-acquisition]