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BAKKAVOR ANNUAL REPORT AND ACCOUNTS 2012 business review international* +5% like-for-like sales growth OUR INTERNATIONAL LOCATIONS canada us europe south africa china CHINA Creative Food Group Shanghai Beijing Wuhan Haiman Xiamen Xianyang Guangzhou 5 farms: Beijing Hebei, Anhui and Jiangsu Gastro Primo Hong Kong La Rose Noire Hong Kong US Two Chefs California Pennsylvania CANADA Bakkavor Foods Canada Ontario EUROPE Cinquième Saison St Pol-de-Léon, France Mâcon, France Crudi Torreilles, France Sogesol Murcia, Spain Vaco Olen Olen, Belgium Vaco Herselt Herselt, Belgium Heli Fresh Foods Milin, Czech Republic Italpizza Modena, Italy SOUTH AFRICA Spring Valley Foods Johannesburg * International: Includes French and Spanish operations which are being sold subject to Competition Authority clearance. OUR FOCUS ON INNOVATION CONTINUED IN OUR INTERNATIONAL BUSINESSES AS WE WORKED WITH OUR KEY CUSTOMERS TO SUPPORT THEIR EXTENSIVE GROWTH PLANS. adjusted ebitda 1 (£m) 11 like-for-like sales 2 (£m) 287 7£11m 12 54% £302m SEGMENT description Our International businesses predominantly supply private label products to major grocery retailers and global foodservice operators. Facilities We operate 26 facilities and employ 3,950 people. Countries of operations We have manufacturing operations in nine countries: Belgium, Czech Republic, France, Italy, Spain, the USA, Canada, mainland China and Hong Kong and South Africa. Sales performance Revenue derived from the International business segment represented £287.2 million or 17% of Group revenue, equating to a 1% decrease on statutory revenues on the previous year and a 5.1% increase in likefor-like revenues. This increase was primarily driven by our North American and Asian businesses as these regions continued to build strong customer relationships. Our Italian pizza business also achieved strong sales growth driven by business wins. Adjusted EBITDA performance Adjusted EBITDA for the International segment was £10.9 million, compared with £7.1 million in 2011, an increase of £3.8 million or 53.5%. Adjusted EBITDA margin increased by 140 basis points to 3.8% in 2012. Our International segment continues to benefit from investment in relationships and growing sales. Our Italian business continues to win new contracts and our Asian business is benefiting from a continuing capital investment programme that has enabled it to grow capacity to meet customer demand and deliver efficiencies. Key innovations and achievements in 2012 Our focus on innovation in 2012 continued in our International businesses as we worked with our key retailers and foodservice operators to support their extensive growth plans. We launched a range of breakfast products with a key foodservice customer in Asia as well as a number of bakery and desserts lines in North America. Our continuous commitment to customer service was recognised through two supplier awards in the USA and China. 11 12 5% 1 Adjusted EBITDA: excludes restructuring costs, management charges to the Group’s parent company, asset impairments and those additional charges or credits that are one-off in nature and significance. 2 Like-for-like sales: exclude the impact of acquisitions, disposals, closures, foreign exchange translation, but include the Group’s share of revenue generated by associates. page 25 VIEW THE FULL REPORT AT ANNUALREPORT12.BAKKAVOR.COM
BAKKAVOR ANNUAL REPORT AND ACCOUNTS 2012 financial review WE DELIVERED A STRONG PERFORMANCE IN 2012 WITH LIKE-FOR-LIKE SALES GROWTH OF 5.4%. This was achieved through new business wins as well as supporting our customers’ pricing initiatives and promotional campaigns. Peter Gates Chief Financial Officer financial highlights 5.4% like-for-like sales growth GROUP REVENUES We continued to show good sales growth for the year despite tough trading conditions, with like-for-like sales growth of 5.4%. This increase was almost entirely volume driven through successful participation in promotional activities, new product launches and new business development. Our pricing, which excludes the one-off costs of promotion activity, remained relatively flat as raw material inflation stabilised during Fiscal Year 2012 and price increases negotiated to offset the effect of the inflation during 2011 remained in place. For further analysis of the Group’s revenue performance refer to our Business Review on page 23. GROSS PROFIT ADJUSTED EBITDA MARGIN (%) 6.4 6.8% 0.4% 11 12 FREE CASH FLOW (£m) 20.6 £23.5m 14% 11 12 The gross profit margin for 2012 was 26.9%, representing a year-on-year increase of 90 basis points. Through a combination of successful new product developments and effective promotional campaigns the Group has seen its gross margin return to levels experienced prior to 2011, a year which was materially affected by unprecedented raw material inflation. DISTRIBUTION AND OTHER ADMINISTRATIVE COSTS Distribution and other administrative costs increased by £15.2 million, or 4.3%, as further costs were incurred to support our investments in innovation and technical excellence to strengthen our leading competitive position. Furthermore, additional personnel costs were incurred to deliver like-for-like sales growth; engineering costs increased to support the final stages of capital investments; and utility costs also increased as a result of inflation. ADJUSTED EBITDA The adjusted EBITDA for the Group was £115.1 million, compared with £107.7 million in 2011, an increase of £7.4 million or 6.9%. Adjusted EBITDA margin increased by 40 basis points from 6.4% in 2011 to 6.8% in 2012. PAGE 26 VIEW THE FULL REPORT AT ANNUALREPORT12.BAKKAVOR.COM
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