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BAKKAVOR ANNUAL REPORT AND ACCOUNTS 2012
our risks
WHO MANAGES OUR RISKS
Management of all risks are assigned to Management Board
members and discussed at each Management Board meeting.
Risks 1 & 2: Ann Savage, Group Technical Director
Risks 3, 4, 5 & 6: Agust Gudmundsson, Chief Executive Officer
Risks 7 & 8: Peter Gates, Chief Financial Officer
1
HOW WE MITIGATE OUR RISKS
We use Hazard Analysis Critical Control Point (HACCP) principles to
identify the food safety controls required in our businesses. All operational
staff are trained in food safety using documented procedures derived from
the HACCP plan. We ensure compliance through audit of our sites and our
suppliers of key raw materials, using a combination of internal and external
food safety experts.
PROGRESS
We have continued to invest in food safety processes in order to
remain leading class in this area.
Risk management in action:
In July 2012 one of our sites was the subject of a malicious and
isolated act of contamination. Our risk management processes
prevented any contaminated products from leaving the factory.
We took additional steps by installing CCTV and encouraging
employees to use our new ‘Speak out’ service. For more
information see page 39.
FINANCIAL RISKS MARKET RISKS OPERATIONAL RISKS
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3
4
5
6
7
8
Our Group Technical Director is responsible for the Group’s H&S policies
and performance and is supported by the Central Technical team which
provides specialist expertise in key areas including H&S. H&S KPIs are
reported monthly to the Management Board.
The team’s role is to embed and monitor sound H&S practices and
standards across the business and to develop a proactive accident
prevention culture across the Group.
We communicate our values internally in order to provide our employees
with a cohesive framework. We recruit, appraise, reward and develop our
employees against these values. We are committed to ‘growing our own’
people and provide relevant training to help our employees reach their
potential. We have developed a ‘talent pipeline’ of employees based on
performance and potential and we identify opportunities for them to grow
within the business.
Customer care is one of our five values. We invest in significant resource
to manage and develop deep and long-lasting relationships with our
customers, ensuring they have access to dedicated Bakkavor employees
at all levels of the decision-making process. At a senior management level
we appoint Customer Champions in the UK to manage customer relations
and long-term strategic account planning.
We regularly commission consumer research and communicate its results
to our marketing and product development teams. Market trends and
Bakkavor’s market share performance are discussed at each Bakkavor
Management Board meeting.
Through its central procurement team the Group aims to benefit from its
scale and strong supplier relationships to achieve the requisite balance
between price, quality, availability and service levels. Where possible it is
the Group’s policy to pass on commodity price increases. Equally, it seeks to
reduce costs and make products as efficiently as possible in order to offset
any delays in achieving price increases.
Bakkavor reviews its projections and covenant position monthly.
The Group believes it is adequately placed to manage this risk
successfully despite the current uncertain economic outlook and
challenging macroeconomic conditions. Mitigating actions in 2012
included successful price negotiations, cost reduction programmes and
enhanced working capital policies, all of which will continue into 2013.
These risks are actively managed by the Group’s Treasury Department. The
Treasury function operates within the framework of strict Board-approved
policies and procedures which are explained further in Note 29 of the
Group Financial Statements.
Our key H&S measure is Major Accidents per 100,000
employees. In 2012 our performance improved by 26% and we
continue to perform significantly better than the average for the
food and drink industry. Our total number of accidents also fell
by 10% in 2012.
In 2012 we relaunched our values across the Group.
See page 21.
For the fourth year in a row we have hit or exceeded our
employee retention targets, achieving retention rates of 90%
for managers and 92% for site-graded employees in 2012.
We filled 45% of our vacancies internally in 2012.
We continue to work collaboratively with customers to secure
joint business plans and deliver growth across the categories
in which we operate. In 2012, we received three supplier
awards from our customers in recognition of our service and
partnership approach.
We launched over 2,000 products in 2012 and won 11 food
product awards, testament to our product quality and innovation.
The Group has increased its level of hedging and as at 29
December 2012 32% of raw material spend for 2013 was hedged.
We will continue to mitigate raw material price volatility through
forward purchasing. However, in certain instances there is not
always a seller willing to enter into such forward contracts.
Further hedging arrangements will be secured where it is both
practical and possible to do so.
We renegotiated our leverage covenant in early 2012, providing
increased headroom and allowing management to focus on the
long-term strategy of the Group. The Directors consider that
the Group has the flexibility to react to further deteriorating
market conditions through implementing previously agreed early
settlement arrangements with our core customers and reducing
our capital expenditure programme. Further actions available to
management include supply chain improvements and additional
cuts to discretionary spend.
Fixed interest rate swaps totalling £300 million matured in the
year, leading to a reduction in interest payments. The Group
continues to enter into forward contracts to reduce the Group’s
exposure to foreign exchange rate movements.
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