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BAKKAVOR ANNUAL REPORT AND ACCOUNTS 2012 financial review RECONCILIATION TO ADJUSTED EBITDA 1 FY 2012 £m FY 2011 £m Operating profit/(loss) 56.8 (2.8) Add back: Depreciation 39.5 39.8 Amortisation 8.7 9.2 Exceptional items (net) 4.4 (7.4) Bakkavor Group ehf. management charge 0.5 1.2 Impairment of assets 1.0 63.7 Loss on disposal of property, plant and equipment 1.3 0.3 (Profit)/loss on disposal of subsidiaries & associates (0.4) 2.6 Share of results of associates after tax (0.9) (1.1) Adjusted EBITDA from discontinued operations 4.2 2.2 Adjusted EBITDA 1 115.1 107.7 Exceptional items are those that, in management’s judgement, should be disclosed by virtue of their nature or amount. Exceptional items comprised: FY 2012 £m FY 2011 £m Restructuring costs 2.8 7.7 Temporary site closure 1.6 – Defined benefit pension scheme credit – (12.0) Legal claim settlement – (3.1) Total 4.4 (7.4) EXCEPTIONAL ITEMS For further analysis of the Group’s adjusted EBITDA performance refer to our Business Review on page 24 and 25. EXCEPTIONAL ITEMS During the year, the Group incurred certain one-off costs as part of a restructuring programme to improve long-term operating performance, particularly in Europe. The costs incurred to implement this restructuring amounted to £2.8 million in the year, the majority of which comprised redundancy costs. The exceptional costs relating to the temporary closure at one of our manufacturing sites following a malicious and isolated act of contamination in the year amounted to £1.6 million. This charge related primarily to the costs associated with the disposal of products, extending our installation of CCTV cameras, and the increased costs of working, which included additional labour costs and further security measures. The exceptional non-cash credit of £12.0 million in 2011 related to the fall in the present value of the defined benefit pension scheme liabilities following the closure of the Group’s scheme to future accrual. Finally, the Group received £3.1 million in 2011 following the conclusion of a legal settlement in respect of a trading dispute. IMPAIRMENT Each year the Group is required to assess the appropriateness of its goodwill carrying value by comparing the asset values with future cash flows expected to be generated from those assets. No impairment of goodwill or intangible assets has been recognised in 2012, although an impairment of £1.0m was recognised in relation to tangible fixed assets which were made redundant. In 2011, an impairment charge of £63.7 million was recognised reflecting a write-down in the carrying values of goodwill, intangible assets and tangible fixed assets due to the combination of adverse trading conditions and management’s decision to exit certain low-margin businesses. OPERATING PROFIT The Company generated an operating profit of £56.8 million (2011: loss of £2.8 million). In 2011, an impairment charge of £63.7 million was recognised but the effect of this was partially offset by a £12.0 million exceptional credit in 2011 relating to the benefit arising from the closure to future accrual of the defined benefit pension scheme. After stripping out the effect of these items, the Group’s operating result improved by £7.9 million in 2012, reflecting the improved sales volumes and factory performance efficiencies. NET DEBT AND INTEREST The Group’s net debt totalled £563.9 million (2011: £591.4 million), representing a reduction of £27.5 million. In line with the term loan amortisation profile, £4.9 million was repaid. An additional £19.7 million was repaid from the funds generated from the equity issue in the Group’s parent company, Bakkavor Group Limited, plus proceeds from the sale of two vacant properties. Net finance costs have reduced from £64.9 million in 2011 to £61.1 million in 2012. This decrease was due to a reduction in average indebtedness over the period coupled with certain long-term fixed rate interest swaps maturing in the year. This decrease was partially offset by refinancing costs related to the corporate re-organisation earlier in the year. TAX The Group recorded a tax charge of £2.8 million (2011: £2.5 million credit) as the Group became profitable in 2012. In addition, a provision was recognised this year to cover certain tax charges that may now materialise in relation to prior years. 1 Excludes restructuring costs, asset impairments and those additional charges or credits that are one-off in nature and significance. PAGE 27 VIEW THE FULL REPORT AT ANNUALREPORT12.BAKKAVOR.COM
BAKKAVOR ANNUAL REPORT AND ACCOUNTS 2012 financial review CASH FLOW Free cash generation from operations Free cash generation before financing activities £ million 2012 2011 Adjusted EBITDA 115.1 107.7 Working capital (2.6) 4.9 Pensions (cash and non-cash) (4.6) (4.4) Interest paid (54.3) (44.3) Tax paid (1.0) (3.4) Capital expenditure (net) (29.1) (39.9) Free cash generated from operating activities 23.5 20.6 £ million 2012 2011 Free cash generated from operating activities 23.5 20.6 Cash impact of exceptional items (5.2) (3.3) Payment of deferred consideration (0.2) (4.6) Acquisition of subsidiary net of cash acquired – (0.2) Disposal of subsidiary net of cash disposed of 1.4 2.6 Refinancing costs (5.5) (19.1) Bakkavor Group ehf cash payments (0.5) (1.2) Cash flow before financing activities 13.5 (5.2) DISCONTINUED OPERATIONS The Group has reached formal agreement with Agrial, Société Cooperative Agricole et Agro-alimentaire, a leading European food co-operative, for the sale of its French and Spanish produce businesses comprising Cinquième Saison Saint-Pol SAS, Cinquième Saison Mâcon SAS, Bakkavor France SAS, Crudi SAS and Sogesol SA for 33 million Euros debt-free cash-free. Completion of the transaction is subject to competition authority clearance, which is expected by the end of the first half of 2013. These operations have been accounted for as discontinued operations and are therefore shown separately in the Group’s income statement. PENSIONS At 29 December 2012, the defined benefit surplus was £10.0 million (2011: £9.3 million surplus). There has been little movement in this surplus as the increase in the fair value of scheme assets has been broadly offset by a broadly equivalent increase to scheme liabilities. The defined benefit pension scheme is subject to a triennial valuation as at March 2013. FREE CASH GENERATED FROM OPERATING ACTIVITIES The increase in free cash generation in the year is attributable to an improved profit performance and a decrease in capital expenditure (referred to below). Offsetting this was an increase in interest payments arising from the payment profile attached to the Senior Secured Notes. These notes were issued in February 2011 with interest payable semiannually in arrears in February and August. As a result, only one interest payment was required in the first year. CAPITAL EXPENDITURE Our 2011 capital expenditure programme focused on capacity enhancements across our portfolio of sites to support our growth objectives and strengthen our market-leading positions. Whilst we have continued to invest in a broad range of projects in 2012, our focus has been to ensure the successful integration of these prior year investments. Nonetheless, we expect capital spend to increase in 2013. In the event of having to respond to an adverse economic environment and manage the broader cash requirements of the business as a whole, we continue to retain flexibility in our discretionary capital spend. OTHER GAINS & LOSSES Other gains of £8.4 million (2011: gain of £6.0 million) included a £6.4 million credit arising on the change in fair value of interest rate swaps. During the year, £250 million of interest rate swaps matured leaving £50 million outstanding as at 29 December 2012, which matures in September 2017. Peter Gates Chief Financial Officer PAGE 28 VIEW THE FULL REPORT AT ANNUALREPORT12.BAKKAVOR.COM
Page 1 and 2: Annual report AND accounts 2012
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Page 5 and 6: welcome to our Bakkavor 'Fast Read'
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