Food producer Bakkavor warns on shrinking margins in early 2019

Bakkavor, the fresh food producer that floated its shares in 2017, expects margins to shrink during the first half of this year, citing “subdued consumer confidence and inflationary pressures”.

The group said it expected little improvement in market conditions this year and limited growth in the UK, which would cause a drop in its margin on earnings before interest tax depreciation and amortisation.

Shares in the company fell as much as 17 per cent on Thursday morning.

Bakkavor forecast a “significant improvement” in trading during the second half of 2019, however, as UK revenues pick up on the back of recently secured new business. It bought cake maker Haydens Bakery last September for £11m.

Its full year performance in 2019 will, as a result, be broadly in line with 2018, it said.

Bakkavor produces fresh prepared food meals, salads, desserts, pizza and bread for a number of major UK supermarkets, including Tesco, Marks and Spencer, Sainsbury’s and Waitrose.

Its main market is in the UK, where it operates 25 factories, but is also expanding in the US ans China, where it has five and nine plants respectively.

It listed in London in November 2017, having pulled its initial public offering plans just one week earlier.

Bakkavor reported full year revenue for 2018 of £1.86bn, up 2 per cent from the previous year and pre tax profit of £67m, up 36 per cent.

Agust Gudmundsson, Bakkavor’s chief executive, said: “We delivered a robust performance in 2018, successfully driving growth across our UK and international businesses against a backdrop of significant market challenges.”

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Analysts at Peel Hunt said the results were in line with its expectations, but noted volume growth “continues to be limited given low consumer confidence”.



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