Bakkavor H1 profit rises, buys Haydens Bakery for £12m

Fresh prepared food provider Bakkavor announced the acquisition of Haydens Bakery from Real Good Food for £12m on Thursday as it posted a rise in first-half profit and revenue.

In the 26 weeks to 30 June, pre-tax profit rose 38.9% to £47.1m on revenue of £910.4m, up 0.8%. Like-for-like revenue was up 2.8%.

The company said that in the UK, which accounts for nearly 90% of its revenue, long-term macro trends remain attractive, with consumers continuing to look for fresh, healthy and convenient choices from the chilled food market.

However, it cautioned that growth this year has been hit by retail price inflation and fairly subdued consumer demand. In addition, it said pressure has continued across its cost base, while labour costs continue to rise, driven by further increases in the national living wage and a step-up in pension auto enrolment costs.

Chief executive officer Agust Gudmundsson said: "We have delivered a positive performance in the first half as we continue to focus on the drivers of long term sustainable growth: leveraging our number one position in the UK fresh prepared food market, accelerating growth in high potential international markets and further improving our operational efficiency.

"Looking ahead, we continue to remain cautious and anticipate little change in underlying economic and market trends. In particular, input price volatility continues which may in turn impact consumer demand going forward. Despite these pressures, our scale, passion for food and close partnerships with our customers leave us well placed and our expectations for the full year remain unchanged."

Bakkavor also announced the acquisition of Haydens, the consideration for which comprises £9.6m in cash and £2.4m of existing finance leased.

Established in 1976, Hardens operates from two sites in Devizes, Wiltshire and manufactures sweet bakery products for the major UK grocery retailers. The business has around 480 employees and for the year ended 31 March 2017, it generated £31.3m of revenues and was break-even in terms of operating profit.

Bakkavor said capital investment of £15m over the last 18 months has transformed the bakery operations, adding significant capacity, expanding the existing footprint and upgrading equipment and infrastructure.

The deal will increase the breadth and depth of Bakkavor's desserts range, extending its offering in in-store bakery. It will also support growth in the company's desserts business, which combined with the ongoing major expansion of its facility in Newark, will provide increased and high quality capacity, as well as state-of-the-art automation.

Bakkavor expects to realise "meaningful" operational synergies by incorporate Haydens into its existing business.

Gudmundsson said: "We are pleased to welcome Haydens to the Bakkavor Group. It is a business which shares Bakkavor's passion for providing outstanding service, quality and value to its customers and has a reputation for supplying some of the best tasting sweet treats to the UK's leading retailers.

"This acquisition will grow both our capacity and product offering in the desserts category, and we are delighted to be welcoming Haydens' management and the wider team to our business."

At 0915 BST, the shares were up 0.5% to 178.40p.