2014
ANNUAL REPORT
& ACCOUNTS
Bakkavor is a leading international
manufacturer of fresh prepared foods,
employing over 18,000 people worldwide
across 50 operating facilities.
Contents
ar14.bakkavor.com / 1
ABOUT BAKKAVOR
At a glance 2
Our products 4
Chairman’s address 5
CREATING VALUE
Our market 8
Our strategy and KPIs 10
Our business model 12
Principal risks 14
DELIVERING GROWTH
Chief Executive’s review 19
Business review – United Kingdom 20
Business review – International 21
Financial review 23
18 product
categories
GOVERNANCE
Our responsibilities 28
Board of Directors 32
Management Board 33
Corporate Governance 34
Directors’ report 36
p.4
How we
create value
for the
long-term
p.12
Chief
Executive’s
review
p.19
FINANCIAL STATEMENTS
Independent auditor’s report 39
Consolidated income statement 40
Consolidated statement of comprehensive income 41
Consolidated statement of financial position 42
Consolidated statement of changes in equity 43
Consolidated statement of cash flows 44
Notes to the consolidated financial statements 45
Company income statement 82
Company statement of changes in equity 82
Company statement of financial position 83
Company statement of cash flows 84
Notes to the company financial statements 85
Company information ibc
Our Group KPIs are indicated by this icon
and can be found on pages 10 and 11.
Download
a copy of
our Company
brochure
online.
View our
annual report
online at
ar14.bakkavor.com
2 / Bakkavor Annual Report and Accounts 2014
2 / Bakkavor Annual Report and Accounts 2014
At a glance
WE HAVE OVER 40 YEARS’ EXPERIENCE OF DEVELOPING
INNOVATIVE, HIGH-QUALITY FRESH PREPARED
FOODS WITH LEADING GLOBAL GROCERY RETAILERS
AND FOODSERVICE PROVIDERS.
1500
2000
2000
2000
1500
1500
2000
1500
1000
500
0
120
100
80
60
40
20
0
120
100
80
60
40
20
0
50
40
30
20
10
0
50
40
30
20
10
0
60
50
40
30
20
10
0
60
50
40
30
20
10
0
1000
1000
1000
500
0
500
500
0
0
STATUTORY SALES £m
LIKE-FOR-LIKE SALES1 £m
1,650
1,693
1,650
1,693
1,651
1,723
1,651
119.9
119.9
109.7
109.7
1,723
43.7
43.7
50.8
50.8
32.3
32.3
33.3
33.3
2000
2000
120
100
+2.6%
1500
80
2013
2014
2013
60
2014
120
100
80
2013
60
2014
2013
+4.4%
2014
2013
2014
2013
2014
2013
2014
2013
2014
2013
2014
1500
1000
2013
2014
500
0
1000
500
0
40
20
0
40
20
0
KEY FACTS & FIGURES
Employ over 18,000 people with over
16,000 based in the United Kingdom
Operate 50 facilities across six countries
Supply over 5,500 products across 18 fresh
prepared foods categories
Trade with the top global grocery retailers
Specialise in private label foods
UNITED KINGDOM
KEY DEVELOPMENTS
LIKE-FOR-LIKE SALES1 £m
ADJUSTED EBITDA2 £m
1,480 1,536
1,480 1,536
104.1
112.9
112.9
104.1
+3.8%
2013
2014
2013
+8.5%
2014
2013
2014
2013
2014
OUR CUSTOMERS
Restructured UK operations to focus on
customer and category leadership
Grew sales ahead of the UK fresh
prepared foods market
Received awards for product innovation,
supplier excellence, health & safety and
sustainability
Entered four-year partnership with the
Prince’s Trust
32
facilities
20
locations
ar14.bakkavor.com / 3
ar14.bakkavor.com / 3
Like-for-like sales exclude the
impact of acquisitions, disposals,
closures and foreign exchange
translation, but include the Group’s
share of revenue generated by
associates.
Adjusted EBITDA excludes
restructuring costs, royalty charges
to the Group’s parent company,
asset impairments and those
additional charges or credits
that are one-off in nature and
significance. The 2013 results
have been restated to reflect the
adoption of IAS 19 (revised 2011)
‘Employee Benefits’. This has had
the effect of reducing the Group’s
prior year Adjusted EBITDA by
£1.9 million.
120
100
2000
1500
1000
500
0
2000
2000
2000
2000
1500
1500
1500
1500
1000
1000
1000
1000
500
500
500
500
0
0
0
0
120
100
80
60
40
20
0
2000
120
50
1500
1000
500
0
100
80
60
40
20
0
40
30
20
10
0
120
100
80
60
40
20
0
50
40
30
20
10
0
60
50
40
30
20
10
0
50
40
30
20
10
0
60
50
40
30
20
10
0
60
50
40
30
20
10
0
1,650
1,693
1,650
1,693
1,651
1,723
1,650
1,693
1,651
119.9
119.9
119.9
109.7
1,723
109.7
1,723
1,651
109.7
43.7
43.7
50.8
43.7
50.8
50.8
ADJUSTED EBITDA2 £m
fREE cASH fLOW 3 £m
cAPITAL EXPENDITURE £m
1
2
32.3
32.3
33.3
32.3
33.3
33.3
2013
2014
2013
2014
2013
2014
2013
2014
2013
2013
2014
2014
2013
2013
2014
2013
2014
2014
2013
2013
2014
2013
2014
2014
100
2013
2013
2014
100
2014
+9.3%
200
200
+35%
150
150
INTERNATIONAL
50
0
50
0
2013
8
7
6
5
4
3
2
1
0
2014
8
120
7
+53%
100
80
6
5
4
3
2
1
0
60
40
20
0
3 Free cash flow is defined as the
amount of cash generated by
the business, after meeting its
obligations for interest, tax and
pensions, and after investments
in tangible fixed assets.
60
80
40
20
0
2000
2000
1500
1500
1000
1000
500
0
500
0
kEY DEVELOPMENTS
LIkE-fOR-LIkE SALES1 £m
ADJUSTED EBITDA2 £m
Expanded our presence in US
Expanded our customer base in Asia
Continued improvement in margins
187
187
171
171
7.0
7.0
5.6
5.6
18
facilities
5
countries
2013
2014
+9.5%
2013
2014
2013
+25%
2014
2013
2014
OUR cUSTOMERS
®
US
Belgium
Italy
Spain
China
4 / Bakkavor Annual Report and Accounts 2014
Our products
SANDWICHES
& SANDWICH WRAPS
PREPARED FRUIT
DRESSED SALADS
& MEAL SALADS
PREPARED VEGETABLES
LEAFY SALADS
FRUIT JUICES
& SMOOTHIES
PIZZA
SPECIALITY BREAD
& BAKERY PRODUCTS
SOUPS
READY MEALS
DIPS
PASTA
SAUCES
DESSERTS
& PASTRIES
READY TO COOK MEALS
FRESH PRODUCE
DRESSINGS
STIR FRY
Chairman’s address
ar14.bakkavor.com / 5
FINANCIAL PERFORMANCE
This has been another successful year for the
Group with our UK market share growing for
the third consecutive year and our International
business making excellent progress.
Statutory sales increased by 2.6% with
like-for-like revenues up 4.4%. Sales growth,
combined with the benefits of restructuring
activity in our UK business, led to an increase
of 9.3% in Adjusted EBITDA to £119.9 million,
giving an Adjusted EBITDA margin improvement
of 50 basis points to 7.1%. Once again, the
Group focused on cash conversion generating
£43.7 million of free cash from operating
activities despite a significant increase in
capital expenditure. Net debt decreased by
£48.1 million to £471.7 million which together
with our strong delivery in EBITDA led to
Net Debt: EBITDA leverage of 3.9 times,
down from 4.7 times last year.
STRATEGIC DEVELOPMENTS
In the UK, we reorganised our operational
structure to further strengthen our customer
relationships and build on our leading
category positions. These changes have
simplified our business structure and reduced
our cost base, enabling us to fund investments
in marketing, innovation and new technologies
to drive growth and manufacturing efficiencies.
The benefits of these actions are already being
evidenced through market share gains and
improved margins.
In our International business, we remain
well placed to benefit from growth in the
fresh prepared food markets, particularly in
the US and Asia. In January 2015, we were
delighted to complete our first acquisition in
seven years, of B. Robert’s Foods, a private
label fresh prepared food manufacturer based
in Charlotte, North Carolina. The acquisition
reinforces our commitment to seeking
growth opportunities within the US market
and complements our existing operations
in California and Pennsylvania.
Over the past two years, we have exited a
number of non-core businesses so that we
can focus resource on growing our presence
in the US and Asia. In 2014, we disposed
of Spring Valley Foods, our South African
prepared fruit business. We also sold 40% of
our Italian pizza manufacturing business to its
senior management. This transaction, which
includes a three-year option for management
to purchase the remaining 60% of the business,
aligns the long-term interest of all parties.
PEOPLE
Once again, I would like to thank all our
employees for their hard work. The growth
we have experienced throughout 2014 has
been driven by their passion and loyalty
to our business. We will continue to place
great emphasis on investing in long-term
opportunities so they can grow their careers
within the business.
OUTLOOK
In a tough trading environment with low
market growth, the Group has made good
progress, increasing revenues, market share,
margins and cash generation. Whilst the results
to date are encouraging, the unprecedented
changes in the UK grocery market mean that
we expect these challenging trading conditions
to persist. Our strategic priorities of targeted
capital investments, close partnering with
our customers, technical excellence and
outstanding product innovation have proved
successful and will remain our focus in 2015.
Lydur Gudmundsson
Group Chairman
11 February 2015
I AM PLEASED TO REPORT
ANOTHER SUCCESSFUL YEAR
FOR BAKKAVOR, CONTINUING
OUR STRATEGY OF LEADERSHIP
IN INNOVATION AND CLOSE
PARTNERING WITH OUR
CUSTOMERS.
LYDUR GUDMUNDSSON
GROUP CHAIRMAN
+4.4%
Like-for-like sales1
1 Like-for-like sales exclude the impact of acquisitions,
disposals, closures and foreign exchange translation, but
include the Group’s share of revenue generated by associates.
WAITROSE GOOD
TO GO WHEATBERRY,
KALE & FETA SALAD
PREPARED AT WINGLAND
FOODS IN SUTTON BRIDGE,
LINCOLNSHIRE
1 Creating value >
8 / Bakkavor Annual Report and Accounts 2014
Our market
RESPONDING TO
MARKET TRENDS
BAKKAVOR INNOVATION 2014
£9.6bn
UK fresh prepared
foods market size 1
Healthy and tasty meal ranges to help people
hit ‘five a day’ and calorie targets
+18%
annual growth
in UK online
sales of fresh and
chilled foods 1
>100
Development
Chefs across the
Group
Traditional cream cakes
with a contemporary twist
Exclusive, chef-inspired ranges
Recipes with ‘on-trend’ flavours and
ingredients such as chipotle, beetroot,
salted caramel, quinoa, kale and
Middle Eastern spices
Snacking pizzas and dips, and party
foods for informal meal occasions
72
Q Award
won for our M&S
beetroot, quinoa and
wheatberries with apple,
pecan nuts and a
cider vinaigrette
salad
new ready meals
launched by Bakkavor
for our UK customers’
health ranges
1 Kantar Worldpanel 52 weeks ending 5 Jan 2015
ar14.bakkavor.com / 9
KEY CHARACTERISTICS OF OUR MARKETPLACE
RETAIL TRENDS
>
CONSUMER
TRENDS
>
FOOD TRENDS
Restructuring physical and online
store portfolios in response to
the growth of convenience stores,
discounters and online sales
Investing more in delivery logistics
and new collection locations to meet
rise in demand for Click and Collect
services
Focusing on communicating with
consumers through social media
networks and ‘smart’ technology
Using simpler pricing and promotions
to communicate better value for money
Developing private label food ranges
to attract and retain consumers
Demand for value for money is
driving bargain-hunting, smaller,
more frequent shopping trips and
a less loyal consumer
Access to mobile technology is
facilitating more research, price
comparing and information sharing
when buying products and services
Improving personal health through
physical activity and healthy eating
remains high on the agenda
Buying more luxuries and treats
to enjoy in the comfort of one’s own
home to help achieve a better
work/life balance
>
Naturally healthy and nutritious foods
to suit specific dietary requirements
Comfort foods and nostalgic recipes
with a modern twist
‘Super premium’ ranges that offer
affordable luxury treats
Increasing popularity of regional
cuisines with hotter spices and
authentic, exotic ingredients
Snacking options that are easy to
eat on the go, out of home or to share
when entertaining at home
WHAT DOES THIS MEAN FOR US?
We use our understanding of market dynamics to develop the right products
for our customers and their consumers and to shape our long-term strategic focus.
>
TARGETING
GROWTH
OPPORTUNITIES
STRENGTHENING
OUR CUSTOMER
RELATIONSHIPS
DEVELOPING OUR
PEOPLE TO DRIVE
INDUSTRY-LEADING
STANDARDS
INVESTING
AND WORKING
EFFICIENTLY
10 / Bakkavor Annual Report and Accounts 2014
Our strategy and KPIs
TARGETING
GROWTH
OPPORTUNITIES
Building on our leading
positions in high-potential,
fast-growing fresh
prepared foods markets.
STRENGTHENING
OUR cUSTOMER
RELATIONSHIPS
Leveraging our strong
customer relationships to
drive mutual and profitable
growth.
INTERNATIONAL EXPANSION
cUSTOMER-ALIGNED
We are well positioned to benefit from growth in the fresh
prepared food markets across the US and Asia, enabling us
to expand in support of our customers’ strategic growth plans.
STRATEGY IN AcTION
Three consecutive years of market share growth in the UK
Added an additional 36,000 sq ft to Bakkavor Jessup
2000
in Pennsylvania
120
50
Acquired B. Robert’s Foods in North Carolina in January
2015 to extend our coverage across the US
1500
100
1000
LIkE-fOR-LIkE SALES1 £m
80
60
40
40
30
20
We are committed to aligning our goals and objectives
with those of our customers, so that our strategic plans
are mutually beneficial. Through this approach, together
with our commitment to customer service, we have built
long-lasting relationships with our customers.
STRATEGY IN AcTION
M&S Chilled Convenience Supplier of the Year
awarded to Cucina Sano
Tesco Category Supplier of the Year
Commenced supply to McDonald’s in China
60
50
40
30
LIkE-fOR-LIkE SALES1 £m
20
500
Why we use this measure
Growth in our like-for-like sales shows how successful we
are at generating sales through product innovation, effective
promotional mechanisms and business wins.
20
10
0
0
0
10
Why we use this measure
Growth in our like-for-like sales shows how successful
we are in aligning our goals and objectives with those of
our customers.
0
2000
1500
1000
500
0
1,650
1,693
1,651
1,723
119.9
109.7
43.7
50.8
32.3
33.3
Recognised in January
2015 for setting a benchmark
in product development,
innovation, product range,
quality and service.
2013
2014
2013
2014
+4.4%
2013
2014
2013
2014
2013
2014
ar14.bakkavor.com / 11
deVelopinG oUr
people to driVe
indUstry-leadinG
standards
Setting the industry
benchmark for safety, quality,
service and innovation
through the talent and
commitment of our people.
inVestinG
and worKinG
efficiently
Delivering sustainable
long-term growth through
capital investment and
a continued focus on
efficiency.
creatinG tHe riGHt cUltUre
tarGeted to deliVer tanGiBle Benefits
Our business is underpinned by a strong set of values, and
we are driving a culture of accident prevention, customer
care, personal development and innovation across all
aspects of the business.
Any investment must demonstrate it can deliver significant
benefits through protecting or winning market share, whilst
still delivering a targeted financial return.
strateGy in action
strateGy in action
£51 million capital expenditure on capacity and
Four RoSPA Gold Awards for our accident prevention work
efficiency investments
‘Recipes for Success’ management development
2000
2000
2000
2000
UK reorganisation reduced complexity and costs across
2000
60
120
50
50
60
120
programme being rolled out
the business
Annual Innovation Awards to celebrate and recognise success
1500
1500
1500
1500
17 industry awards for product quality and innovation
120
eMployee retention
1000
500
Why we use this measure
Retaining employees who
have the right behavioural
values, and having systems
in place to ensure they
can develop with us to the
best of their potential, is
1,650
fundamental to our success.
0
100
1000
80
60
500
40
20
0
0
1000
1000
Major accidents
per 100,000 eMployees
500
500
0
0
Why we use this measure
We monitor our performance
against the industry average
as part of our commitment
to take every reasonable step
to protect the health & safety
1,723
1,693
1,651
of our employees.
1,651
1,693
1,650
87%
employees
retained 2014
(2013: 92%)
107
59%
reduction
on 2013
44
100
100
Effective working capital management delivered
40
40
£27 million cash inflow
80
30
20
30
free casH flow3
20
50
1500
40
30
1000
20
50
40
30
20
80
60
60
adjUsted eBitda2
40
40
20
20
Why we use this measure
This measure demonstrates
the Group’s effectiveness in
converting sales into profitable
growth.
10
0
0
0
10
10
10
500
Why we use this measure
The generation of free cash
flow enables us to re-invest
funds in the business for
future growth and to pay
down debt.
0
0
0
0
119.9
109.7
109.7
119.9
1,723
43.7
43.7
50.8
50.8
32.3
32.3
33.3
33.3
+9.3%
+35%
2013
2014
2013
2013
2014
2014
2013
2014
2013
2014
2013
2014
2013
2014
2013
2014
2013
2014
2013
2014
2013
2014
1 Like-for-like sales exclude the impact of acquisitions, disposals, closures and foreign exchange translation, but include the Group’s share of revenue generated by associates.2 Adjusted EBITDA excludes restructuring costs, royalty charges to the Group’s parent company, asset impairments and those additional charges or credits that are one-off in nature and significance. The 2013 results have been restated to reflect the adoption of IAS 19 (revised 2011) ‘Employee Benefits’. This has had the effect of reducing the Group’s prior year Adjusted EBITDA by £1.9 million.3 Free cash flow is defined as the amount of cash generated by the business, after meeting its obligations for interest, tax and pensions, and after investments in tangible fixed assets. 12 / Bakkavor Annual Report and Accounts 2014
Our business model
WE CREATE SAFE,
HIGH-QUALITY FOODS
WHICH DELIVER A RETURN
FOR OUR CUSTOMERS,
WHILST ALSO PROVIDING
CHOICE AND VALUE
FOR MONEY FOR THEIR
CONSUMERS. WE USE
THE CASH GENERATED
TO MEET OUR FINANCIAL
OBLIGATIONS AND
RE-INVEST IN FUTURE
BUSINESS GROWTH.
CUSTOMERS
PRODUCTS
NURTURING CUSTOMER
RELATIONSHIPS
DEVELOPING INNOVATIVE
PRODUCTS
Being committed to supplying
outstanding customer service
and value
Developing, producing and
supplying high-quality fresh
prepared foods
Setting the food industry
benchmark for safety, quality,
and innovation
Staying at the forefront of
relevant food and consumer
trends
Developing great-tasting food
at the right price
Encouraging and rewarding
a culture of innovation within
our business
3
major supplier
awards from
customers
17
product
innovation
awards
ar14.bakkavor.com / 13
ASSETS
CASH
INVESTMENT
MANAGING OUR KEY
ASSETS EFFECTIVELY
FOCUSING ON CASH
GENERATION
Investing in continuous
improvement throughout
the business
Developing Centres of
Excellence which strengthen
our core capabilities
Recruiting and developing
the right people
Focusing on overhead spend
to drive efficiencies
Using our global buying platforms
to source quality ingredients
at the right price
Managing working capital
effectively
MAKING INVESTMENTS
THAT DELIVER RETURNS
Following a highly selective
capital expenditure programme
Setting expectations to meet
targeted returns on investment
Reducing leverage and debt to
strengthen our capital structure
£50.8 million
capital
expenditure
£43.7 million
of free cash
generated
leverage
reduced to
3.9 times
14 / Bakkavor Annual Report and Accounts 2014
Principal risks
WE HAVE IDENTIFIED EIGHT KEY RISKS,
THE SUCCESSFUL MANAGEMENT OF WHICH
IS VITAL TO THE DAY-TO-DAY RUNNING OF OUR
BUSINESS AND OUR ABILITY TO MEET OUR
STRATEGIC GOALS.
RESPONSIBILITY FOR RISK MANAGEMENT
GROUP BOARD
v
MANAGEMENT BOARD
Responsible for managing key risks and
internal control procedures
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FOOD SAFETY
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HEALTH
& SAFETY
(H&S)
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RISKS
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LOSS OF
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CONSUMER
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CUSTOMER
RELATIONSHIPS
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ARKETRISKS
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OPERATIONAL TEAMS
Dedicated teams responsible for assessing and
managing risks at operational level
KEY RISKS TO THE BUSINESS
OPERATIONAL RISKS
FOOD SAFETY & INTEGRITY
Millions of people eat our products every
day. We have a duty to make food that is
safe and is clearly and correctly labelled.
HEALTH & SAFETY (H&S)
We understand our duty of care to secure
and protect the H&S of our employees.
LOSS OF KEY EMPLOYEES
We have a highly experienced senior
management team who are passionate
about the business and whom we consider
to be a key competitive strength.
MARKET RISKS
CUSTOMER RELATIONSHIPS
We work with a limited number of the
largest food retailers and foodservice
operators in the world.
CONSUMER UNDERSTANDING
Our in-depth consumer understanding
enables us to develop a diverse, innovative
and commercially viable product range,
which is critical to maintaining customer
relations and future growth.
INPUT COST INFLATION
We spend over £800 million on ingredients
and packaging every year and may be
exposed to fluctuating raw material
and energy costs.
FINANCIAL RISKS
COVENANT COMPLIANCE
We are subject to various financial covenants
and undertakings as a consequence of our
borrowing agreements.
INTEREST RATES, FOREIGN EXCHANGE RATES,
LIQUIDITY & CREDIT
In the multi-currency trading environment
in which the Group operates, there are
inherent risks associated with fluctuations
in both foreign exchange rates and interest
rates. In the current environment, the Group’s
credit rating and its ability to obtain funding
are also specific risks.
WHAT MIGHT HAPPEN IF WE GET IT WRONG
HOW WE MITIGATE OUR RISKS
PROGRESS DURING THE YEAR
ar14.bakkavor.com / 15
Consumer safety and confidence is vital to
us; any issue that breaches that trust will also
impact our industry’s long-term prospects
and our reputation.
The safety of our employees is paramount
to our continued success and getting it
wrong could carry significant reputational
and legal risk.
Hazard Analysis Critical Control Point
The Group maintains industry-leading food
(HACCP) principles used to identify food
safety controls and train our people.
Sites and key raw material suppliers
audited by internal and external food
safety experts.
H&S KPIs reported monthly to the
Management Board.
H&S is managed by our experts who
embed and monitor our practices.
Culture of engagement from the
Management Board through to the
shop floor on accident prevention.
safety and traceability procedures.
All our businesses and key suppliers are
extensively audited both by our internal team
and external parties.
Significant reduction in major accidents
per 100,000 employees from 107 to 44,
compared to a marginal fall in the industry
benchmark from 212 to 210.
We risk being unable to fulfil our strategic
growth objectives without the recruitment,
development and retention of talented and
committed people who understand and
respect our values.
Values used to recruit, appraise, reward
We expanded our Apprenticeship and
and develop employees.
Succession planning, long-term management
incentives, retention initiatives and a
commitment to training.
Graduate Development Schemes in 2014
and will continue this investment into 2015.
Ongoing investment in people development
by providing training for all employees and
recruiting the best in the industry.
Given the size and relatively small number
of our customers, any major customer loss
would have a significant negative impact on our
turnover, manufacturing efficiency and profit.
Business Directors appointed as Customer
Tesco Category Supplier of the Year and M&S
Champions to manage strategic relationships
and account planning.
Communication with our customers at all levels
of the decision-making process.
Chilled Convenience Supplier of the Year.
Ongoing work with major customers on joint
optimisation projects to deliver mutual growth.
Investing in product areas which fail or
underperform is costly in terms of resource
and profitability, and our reputation with our
customers.
Increases in raw material prices adversely
affect individual product margins. An inability to
pass on these cost increases within a reasonable
timeframe impacts the Group’s profit.
Investment in market research to capture
Over 1,200 new products launched.
latest consumer trends.
17 product awards received for quality
Market share performance and trends
and innovation.
discussed at each Management Board meeting.
Annual Innovation Awards held to celebrate
success in product development, new
processes and technology.
Central procurement team focuses on
achieving balance between price, quality,
availability and service levels.
Forward purchasing agreed and price
increases passed on where possible.
Continued focus on cost reduction and
productivity enhancements.
We reorganised and streamlined our central
purchasing team and increased our direct
purchasing through our procurement team
in China.
To achieve our growth objectives, we require a
strong financial platform. Breaching any covenant
would destabilise the business and impair our
ability to secure future financing.
Financial results, projections and covenant
performance reviewed regularly.
Leverage has fallen significantly over the past
12 months and is below 4x at the year-end.
Open and regular dialogue with our lenders
and an active investor engagement programme.
The Group has maintained comfortable
headroom with regard to all its covenants.
To achieve our growth objectives, we require
a strong financial platform. An inability to
access liquidity or a downgrading of the Group’s
credit rating could impair our ability to secure
future financing.
Treasury function operates within framework
Revolving credit and receivables financing
of strict Board-approved policies and
procedures (see note 29 of the Group
Financial Statements).
Active foreign exchange hedging programme.
Majority of borrowings are at fixed
interest rates.
facilities remain undrawn at year-end.
Accelerated amortisation of our term loan
with a prepayment of £44.2 million in the year.
WAITROSE MUSHROOM
& SPINACH FILO PARCELS
PREPARED AT BAKKAVOR
MEALS ABBEYDALE IN
WEMBLEY, LONDON
2 Delivering growth >
TESCO FINEST BELGIAN
CHOCOLATE & IRISH CREAM
PROFITEROLE CHEESECAKE
A JOINT COLLABORATION
BETWEEN OUR TWO DESSERTS
FACTORIES BASED IN HIGHBRIDGE,
SOMERSET AND NEWARK,
NOTTINGHAMSHIRE
Chief Executive’s review
ar14.bakkavor.com / 19
in a tOugh trading
envirOnment with lOw
market grOwth, the grOup
has made gOOd prOgress,
inCreasing revenues,
market share, margins
and Cash generatiOn.
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0
50
40
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10
0
Agust gudmundsson
Chief exeCutive OffiCer
60
50
40
30
20
10
0
Capital expenditure £m
1,650
1,693
1,651
1,723
43.7
50.8
119.9
109.7
32.3
33.3
2013
2014
2013
2014
2013
2014
2013
2014
2013
2014
+53%
Overview
investing in Our business
This was a year in which we restructured our
UK business to intensify our focus on customers
and category leadership; increased our
UK marketshare; invested heavily to deliver
on the demand from new business wins;
and realigned our International resources to
benefit from growth in the fresh prepared
foods markets in the US and Asia.
We grew revenues, improved margins and
generated strong free cash flow which
helped us strengthen our balance sheet
for future growth. We have carried this
momentum into 2015.
All of this was achieved despite subdued
consumer spending, limited growth in the
retail food market and unprecedented levels
of change across the UK grocery market.
COmpetitive envirOnment
As has been widely reported, there are
unprecedented levels of change currently
affecting the UK grocery market. This has
focused on increased sales in the discounter
channel, increasing online volumes and
a trend towards shopping in smaller
convenience outlets.
Although the hard discount retailers continue
to gain ground, we remain committed to
supporting the growth plans of our existing
customers reinforcing our collaborative
approach in driving mutual growth. To capture
opportunities online, we work closely
with customers to optimise cross-selling
opportunities, the benefits of which are already
being seen. Consumers have also changed
how and where they shop with a growing
trend towards ‘little and often’. We are well
positioned to participate in this growth area
through our leading positions across a wide
range of fresh prepared foods.
With the improvement in both our trading
results and cash generation, we took the
opportunity to increase our levels of capital
spend in 2014. These investments have
increased capacity and enhanced productivity
across the Group, particularly in the
categories of chilled bread, pizza and salads.
This level of spend represents c.3% of sales
across the Group. We have a healthy pipeline
of opportunities and expect this level of
capital investment to continue into 2015.
innOvatiOn exCellenCe
We firmly believe innovation is fundamental
to the growth of our business. We launched
over 1,200 new products in the year and
held our annual Innovation Awards which
celebrate success in product development,
new processes and technology. Our success
was also recognised externally as we won
17 industry awards for product innovation and
quality as well as three major awards from
our customers. In addition, in January 2015
we also won Manufacturer of the Year at the
Food Management Today Awards where we
were recognised for setting a benchmark in
product development, innovation, product
range, quality and service.
Agust Gudmundsson
Chief Executive Officer
11 February 2015
20 / Bakkavor Annual Report and Accounts 2014
United Kingdom
IN 2014 OUR UK BUSINESS
DELIVERED ENCOURAGING
FINANCIAL RESULTS.
WE RESTRUCTURED OUR
BUSINESS TO FURTHER
FOCUS ON CUSTOMER AND
CATEGORY LEADERSHIP.
MIKE EDWARDS
CHIEF OPERATING OFFICER
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0
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0
OVERVIEW
Our UK businesses primarily manufacture
private label fresh prepared foods on behalf
of all the major grocery retailers. We operate
32 facilities and employ over 16,000 people.
We have over 40 years’ fresh prepared
foods experience in the UK and have the
highest market share in 12 of the 16 product
categories in which we operate. As a result,
we estimate our consolidated market share
across these 16 categories to be around 30%.
BUSINESS PERFORMANCE
In line with the total UK grocery market,
the fresh prepared food market has softened
over the past year following a reduction in
promotional activity and subdued consumer
spending. Despite this, our UK segment
generated statutory revenues of £1,520.1 million,
an increase of 3.8% on a like-for-like basis,
comfortably ahead of the wider UK fresh
prepared foods market which only grew
by 1.5% in the year. Our market share has
grown for the third consecutive year and,
importantly, we have increased year-on-year
revenues with all of our key customers.
Growth remained predominently volume
driven as the annualised effect of business
wins offset the weaker underlying market.
Although food price deflation has been
widely reported in the media, we experienced
year-on-year inflation across our cost base,
including utilities and labour. Looking forward
into 2015, there remain pockets of significant
inflation for key ingredients such as chicken
and seafood, and we expect to continue
to see pressure on labour costs in a period
of rising employment.
120
100
80
60
40
20
0
LIKE-FOR-LIKE SALES1 £m
ADJUSTED EBITDA2 £m
1,480 1,536
104.1
1,480 1,536
112.9
112.9
104.1
+3.8%
+8.5%
2013
2014
2013
2013
2014
2014
2013
2014
The margin improvement of 30 basis
points in the year has principally been driven
by the restructuring of our UK business.
We reorganised the reporting lines, sharpening
our focus and collaboration, and allowing us
to reduce cost and complexity across the
business. Furthermore, following a number
of significant wins over this past year,
we took the opportunity to withdraw from
certain low-margin business due to poor
commercial returns. As normal, we will
continue to review the commercial returns
across our product portfolio and take actions
as appropriate to protect our margin.
CAPITAL INVESTMENT
Most of our capital expenditure is dedicated
to the UK market. In the first quarter of
2014 we completed a number of projects
across our salads facilities, leveraging new
technologies and reconfiguring sites to further
improve quality as well as increase capacity.
These investments are already delivering
good returns as we responded to increased
demand through the summer.
We have also completed a significant
investment in our pizza business which
has enabled us to consolidate our number
one market position through increasing
our stone-baking and wood-fired capacity.
In addition, we have recently completed
an investment in additional baking capacity
at our chilled breads facility in response to
increased customer demand. This investment
enhances both the quality of our offering
in the growing artisan bread market as well
as increasing capacity and efficiencies.
1
2
Like-for-like sales exclude the impact of acquisitions,
disposals, closures and foreign exchange translation, but
include the Group’s share of revenue generated by associates.
Adjusted EBITDA excludes restructuring costs, royalty
charges to the Group’s parent company, asset impairments
and those additional charges or credits that are one-off
in nature and significance. The 2013 results have been
restated to reflect the adoption of IAS 19 (revised 2011)
‘Employee Benefits’. This has had the effect of reducing
the Group’s prior year Adjusted EBITDA by £1.9 million.
International
WE ARE WELL POSITIONED
TO BENEFIT FROM GROWTH
IN THE FRESH PREPARED
FOODS MARKETS ACROSS
THE US AND ASIA.
JOHN GORMAN
PRESIDENT – BAKKAVOR USA INC.
OVERVIEW
Our International businesses predominantly
supply private label products to major grocery
retailers and global foodservice operators.
We operate 18 facilities and employ over
1,800 people. These operations are based
in five countries: Belgium, Italy, Spain, the
US and China (including Hong Kong).
BUSINESS PERFORMANCE
Our International segment has undergone
significant restructuring in the past two years
with the sale of our Czech and South African
businesses, and the closure of our Canadian
operations. As a result of these transactions,
revenues, as presented on a statutory basis,
declined in the period. On a like-for-like
basis however, excluding the effect of these
disposals and closures and adjusting for
currency movements, revenues grew by 9.5%.
Although our International segment is
experiencing strong growth, it is not yet
operating at margins comparable with our
UK segment. Our businesses in the US and
Asia are continuing to build their presence and
scale, which will require further investment
and will therefore limit margin growth in the
short term. Our investment has focused on
capacity and technical capability in Asia as we
increase our customer base across the food
service industry. In the US, we are increasing
capacity due to greater demand from new
and existing customers.
120
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7
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6
5
4
3
2
1
0
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0
EINAR GUSTAFSSON
MANAGING DIRECTOR – BAKKAVOR ASIA
200
8
7
6
5
4
3
2
1
0
150
100
50
0
200
150
100
50
0
LIKE-FOR-LIKE SALES1 £m
ADJUSTED EBITDA2 £m
187
171
171
187
5.6
7.0
7.0
5.6
+9.5%
+25.0%
2013
2014
2013
2013
2014
2014
2013
2014
ar14.bakkavor.com / 21
Our European businesses, which are more
established in their respective markets, are
continuing to show signs of recovery following
a period of weak consumer demand and
high input costs.
Adjusted EBITDA margin for our Internationals
segment was 4.1%, representing an
improvement of 110 basis points, and whilst
this is encouraging we will continue to take
firm action to further improve margins.
CAPITAL INVESTMENT
We continue to invest in our International
businesses. The expansion to our East
Coast facility in the US remains on track
with completion due in summer 2015. This
additional space will triple capacity, replicating
our successful and established business on
the West Coast and allowing us to continue
to grow with national customers.
In January 2015 we also completed the
acquisition of B. Robert’s Foods, a private
label fresh prepared food manufacturer based
in Charlotte, North Carolina. This transaction
increases our customer base and widens our
manufacturing presence across the country.
2000
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0
1
2
Like-for-like sales exclude the impact of acquisitions,
disposals, closures and foreign exchange translation, but
include the Group’s share of revenue generated by associates.
Adjusted EBITDA excludes restructuring costs, royalty
charges to the Group’s parent company, asset impairments
and those additional charges or credits that are one-off
in nature and significance. The 2013 results have been
restated to reflect the adoption of IAS 19 (revised 2011)
‘Employee Benefits’. This has had the effect of reducing
the Group’s prior year Adjusted EBITDA by £1.9 million.
A TRIO OF PIZZA EXPRESS
PIZZA SLICES
WE MANUFACTURE RETAIL
PIZZAS FOR PIZZA EXPRESS.
SAINSBURY’S WAS THE FIRST
SUPERMARKET TO SELL
THESE PRODUCTS BACK
IN JANUARY 2001
Financial review
ANOTHER YEAR OF SOLID
PROGRESS WITH SALES
GROWTH OUTPERFORMING
THE MARKET, MARGIN
IMPROVEMENT AND A
SIGNIFICANT REDUCTION TO
NET DEBT AND LEVERAGE.
GROUP REVENUES
The Group reported revenues of
£1,692.6 million for the year ended
27 December 2014, an increase of 2.6%
on the prior year. On a like-for-like basis,
excluding sold and closed businesses and
at constant currency, revenue growth was
4.4%. Once again we outperformed the
wider fresh prepared foods market in the UK
as we benefited from annualised business
wins, successful customer relaunch activity
and favourable weather patterns with a
relatively mild winter and reasonable summer.
Our International revenues declined in statutory
terms due to the sale of our South African
prepared fruit business in January 2014. On
a like-for-like basis, however, our International
segment delivered excellent growth through
business wins with new and existing customers.
GROSS PROFIT
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500
0
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PETER GATES
GROUP CHIEF FINANCIAL OFFICER
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40
30
20
10
0
60
The gross profit margin for 2014 was
27.0%, representing a year-on-year increase
of 30 basis points. The Group benefited from
increased efficiencies at our facilities driven
by volume growth as well as productivity
investments made earlier in the year.
40
50
30
20
Although food price deflation has been widely
reported in the media, we experienced
year-on-year inflation across our total
10
0
ADJUSTED EBITDA2 £m
RECONCILIATION TO ADJUSTED EBITDA2
ar14.bakkavor.com / 23
cost base, including utilities and labour.
Looking forward into 2015, there still remain
pockets of significant inflation for key
ingredients, such as chicken and seafood,
and we continue to see pressure on labour
costs in a period of rising employment.
DISTRIBUTION AND OTHER
ADMINISTRATIVE COSTS
The Group has continued to focus tightly
on overheads with distribution and administrative
costs increasing by 0.5% year-on-year, against
sales growth of 2.6%. We continued to
invest to support volume growth and product
innovation, and benefited from the UK
restructuring initiatives and a strict control
on discretionary spend across the Group.
ADJUSTED EBITDA2
Adjusted EBITDA for the Group was
£119.9 million, compared with £109.7 million
in 2013, an increase of £10.2 million.
As a result, our Adjusted EBITDA margin
increased by 50 basis points from 6.6% to
7.1%. Increased volumes and productivity
investments helped to support our margin,
and the restructuring of our UK business
was fundamental in reducing both cost and
complexity, in support of margin growth.
1,650
1,693
1,651
1,723
119.9
109.7
43.7
32.3
2013
2014
2013
2014
2013
2014
+9.3%
2013
2014
2
Adjusted EBITDA excludes restructuring costs, royalty
charges to the Group’s parent company, asset impairments
and those additional charges or credits that are one-off
in nature and significance. The 2013 results have been
restated to reflect the adoption of IAS 19 (revised 2011)
‘Employee Benefits’. This has had the effect of reducing
the Group’s prior year Adjusted EBITDA by £1.9 million.
£ million
Operating profit
50.8
Add/(deduct):
Depreciation
33.3
Amortisation
Exceptional items (net)
Parent royalty charge
Impairment of assets
Profit on disposal of property, plant and equipment
Profit on disposal of subsidiaries
Share of results of associates after tax
2013
2014
Adjusted EBITDA2
For further analysis of the Group’s adjusted EBITDA performance refer to
our Business Review on pages 20 and 21.
FY 2014 FY 2013
67.1
41.2
36.0
38.2
8.7
6.6
1.2
4.1
(1.0)
(1.8)
(1.0)
119.9
8.7
1.7
1.2
21.7
–
(1.8)
(1.2)
109.7
24 / Bakkavor Annual Report and Accounts 2014
Financial review
+4.4%
Like-for-like sales1
+9.3%
Adjusted EBITDA2
£6.6m
We incurred one-off costs
as a result of our restructuring
programme
£119.9m
Adjusted EBITDA2
EXCEPTIONAL ITEMS
Exceptional items are those that, in management’s judgement, should be disclosed by virtue
of their nature or amount. Exceptional items comprised:
£ million
Restructuring costs
Insurance claim
Total
2014
(6.6)
–
(6.6)
2013
(2.5)
0.8
(1.7)
The restructuring of our UK businesses,
which we announced earlier in the year,
provides greater alignment in our approach
to our categories and intensifies our focus on
customers. The benefits of the reorganisation
are already being seen through greater
efficiencies and a strong pipeline of new
product launches. As a consequence of this
restructuring and other reorganisation initiatives,
the Group has recognised exceptional
charges of £6.6 million in 2014, principally
arising from redundancy payments.
IMPAIRMENT
Each year the Group is required to assess
the appropriateness of its goodwill and
intangible asset carrying values by comparing
the carrying values with future cash flows
expected to be generated from those assets.
An impairment charge of £2.6 million
(2013: £21.2 million) to goodwill and
£0.1 million (2013: £nil) to intangible assets
was recognised, representing a write-down
of less than 1% of our goodwill carrying
value. This was due to more difficult trading
conditions across two of our UK businesses.
A further impairment charge of £1.4 million
(2013: £0.5 million) was recognised in respect
of property, plant and equipment.
OPERATING PROFIT
Operating profit increased by £25.9 million
to £67.1 million, representing an operating
margin of 4.0%, 150 basis points ahead of
the prior year. The majority of this improvement
was caused by a one-off impairment charge
to assets of £21.7 million in the prior year,
which entirely related to our International
businesses. After stripping out the effect
of impairments in both years, the Group’s
operating profit improved by £8.3 million,
or 40 basis points, reflecting benefits
from strong sales growth, productivity
enhancements and strict cost controls.
FINANCING COSTS
Net finance costs reduced from £58.9 million
to £53.2 million in 2014. Given the Group’s
high level of fixed interest charges, borrowing
costs remained relatively flat at £48.8 million
(2013: £48.2 million). The decrease in finance
costs was therefore principally driven by
higher non-cash charges in 2013, including
the early amortisation of refinancing fees
relating to our previous funding structure.
Other gains and losses represented
mark-to-market movements on both the
Group’s remaining fixed rate interest swap,
maturing in 2016, and foreign exchange forward
contracts and options. The loss in 2013 was
affected by the impact of hedging the Group’s
operations in South Africa where the exchange
rate was particularly volatile. The Group
has now sold these operations.
TAX
The Group tax charge was £4.1 million for
2014 (2013: credit of £6.4 million). The higher
tax charge is due to the increased profit
before tax of £15.6 million this year compared
with a loss before tax of £19.5 million in 2013.
1
Like-for-like sales exclude the impact of acquisitions, disposals, closures and foreign exchange translation, but include the
Group’s share of revenue generated by associates.
2 Adjusted EBITDA excludes restructuring costs, royalty charges to the Group’s parent company, asset impairments and those
additional charges or credits that are one-off in nature and significance. The 2013 results have been restated to reflect the
adoption of IAS 19 (revised 2011) ‘Employee Benefits’. This has had the effect of reducing the Group’s prior year Adjusted
EBITDA by £1.9 million.
ar14.bakkavor.com / 25
Financial review
CASH FLOW3
£ million
Adjusted EBITDA2
Adjusted EBITDA2 from discontinued operations
Working capital
Pensions (cash and non-cash)
Interest paid
Tax paid
Capital expenditure (net)
Free cash generated from operating activities
Free cash generated from operating activities
Cash impact of exceptional items
Payment of deferred consideration
Disposal of subsidiary net of cash disposed of
Tax paid on disposal of subsidiary
Disposal of investment
Refinancing costs
Cash before financing activities
2014
119.9
–
26.8
(3.8)
2013
109.7
0.9
11.1
(3.7)
(49.0)
(52.1)
(1.0)
(0.8)
(49.2)
(32.8)
43.7
32.3
43.7
(5.8)
–
3.5
–
7.3
–
48.7
32.3
(3.2)
(0.1)
27.0
(2.0)
–
(11.1)
42.9
CASH FLOW, NET DEBT AND LEVERAGE
PENSIONS
Free cash generation improved by £11.4 million
in the year as we benefited from both increased
profitability and effective working capital
management. As a result of the cash inflow
and disposal proceeds, net debt reduced
£48.1 million to £471.7 million. Leverage
(the ratio of net debt to Adjusted EBITDA)
was 3.9 times at the year end, down from
4.7 times last year. The Group is operating
with good headroom against all financial
covenants and remains focused on further
deleveraging.
Our liquidity position remains strong with
our revolving credit and receivables financing
facilities both undrawn at the year-end. We
have therefore accelerated the amortisation
of our term loan with a prepayment of
£44.2 million to lenders during the year,
leaving an outstanding balance of only
£10 million due for repayment in October 2016.
Earlier in the year, the Group and the Trustee
agreed the triennial valuation of the UK defined
benefit pension scheme as at 31 March 2013.
This resulted in a funding shortfall which
will be paid over a six-year period ending on
31 March 2020. The recovery contributions are
paid monthly and amount to £4.5 million per
annum through to 31 March 2016, £2.0 million
in the year to 31 March 2017 and £1.0 million
per annum in the following three years.
For accounting purposes, the Group must
apply the IAS 19 valuation principles. On this
basis, the Group recognised a surplus of
£6.7 million as at 27 December 2014 (2013:
surplus of £2.6 million). Although a reduction
in the discount rate used by the Group to
value the scheme’s liabilities has led to an
increase in liabilities, this was more than
offset by the combination of the performance
of the scheme’s assets and the recovery
contributions paid.
As required by accounting standards, the
Group applied ‘IAS 19 (Revised 2011): Employee
Benefits’, from the start of the financial year
ending 27 December 2014. This has led to
a restatement of our prior year results. The
changes have led to a £0.8 million reduction
in the non-cash financing credit recognised in
the 2013 Income Statement. In addition, the
scheme administration costs, which totalled
£1.1 million, have been recognised as an
operating cost in the 2013 Income Statement.
These costs had previously been allowed for
within the calculation of the expected return
on assets, acting to reduce the non-cash
financing credit. These changes have had no
impact on cash funding requirements and no
impact on the surplus for actuarial purposes.
Peter Gates
Chief Financial Officer
2
Adjusted EBITDA excludes restructuring costs, royalty charges to the Group’s parent company, asset impairments and those
additional charges or credits that are one-off in nature and significance. The 2013 results have been restated to reflect the
adoption of IAS 19 (revised 2011) ‘Employee Benefits’. This has had the effect of reducing the Group’s prior year Adjusted
EBITDA by £1.9 million.
3 Free cash flow is defined as the amount of cash generated by the business, after meeting its obligations for interest, tax and
pensions, and after investments in tangible fixed assets.
M&S TRATTORIA SPINACH
& RICOTTA RAVIOLI
PREPARED AT CUCINA SANO
IN OLD LEAKE, LINCOLNSHIRE
3 Governance >
28 / Bakkavor Annual Report and Accounts 2014
Our responsibilities
RUNNING OUR BUSINESS
RESPONSIBLY ENABLES US TO
CREATE TANGIBLE BENEFITS
ACROSS THE GROUP.
We gain trust from our stakeholders by
setting industry standards and we manage
our resources more efficiently and cost
effectively.
We have a focused approach, concentrating
our actions where we have direct control
and, consequently, where we can make the
most impact.
SUPPLIERS/CONTRACTORS
Collaboration to promote customer
service, food safety excellence and
continuous improvement.
CUSTOMERS
Strong day-to-day customer
engagement across the business.
INVESTORS
Open, timely and unbiased
communication which
respects commercial
sensitivities.
UNIONS
Development of
productive partnerships
with our unions.
OUR KEY STAKEHOLDERS
Proactive engagement allows us
to discover what we do well and
where we can improve; it also
promotes the understanding of
our long-term business aims.
EMPLOYEES
Formal and informal
communication channels.
INDUSTRY BODIES
Participation in food
industry debates by engaging
with leading industry bodies
and working groups.
COMMUNITY
Understanding of local
community viewpoints and
development of community
relationships.
Our responsibilities
Communities
WE SUPPORT CAUSES CLOSE
TO WHERE WE OPERATE
SUCH AS LOCAL SCHOOLS,
GROUPS, SPORTS CLUBS
AND CHARITIES.
our PeoPle
GROWING THE TALENTS OF
OUR OWN PEOPLE PLAYS A kEY
ROLE IN OUR SUCCESS. WE RUN
GRADUATE, APPRENTICESHIP
AND mANAGEmENT
DEVELOPmENT SCHEmES.
OUR VALUES
Customer care
Can-do attitude
Teamwork
Innovation
Getting it right,
keeping it right
HealtH & safety
WE TRAIN AND ENGAGE OUR
PEOPLE TO DEVELOP A PROACTIVE
SAFETY AWARENESS AND
ACCIDENT PREVENTION CULTURE.
fooD safety
OUR FOOD SAFETY COmmITmENT
INCLUDES RUNNING OUR OWN
mICROBIOLOGY AND CHEmISTRY
LABORATORIES.
environment
WE FOCUS ON AREAS
WHERE WE CAN mAkE A
REAL DIFFERENCE: ENERGY,
WASTE, WATER, PACkAGING
AND TRANSPORT.
30 / Bakkavor Annual Report and Accounts 2014
Our responsibilities
FOOD SAFETY & INTEGRITY
We have a duty to make food that is safe
for people to eat and correctly labelled.
We must also respect and protect the
integrity of our customers’ brands.
HEALTH & SAFETY
We take every practical step to secure
and protect the Health & Safety of our
own employees and people who work
at our premises.
RIGOROUS CONTROLS
ACCIDENT PREVENTION CULTURE
Our central technical team, led by our
Group Technical Director, ensures we have
rigorous food safety controls in place. These
are backed up by stringent quality policies
and procedures which recognise our legal
and customer requirements along with
HACCP-based quality management systems
to support the high standards we expect.
We carry out scientific testing in our own
laboratories, announced and unannounced
internal audits, and regular management
reviews to verify our processes. All of our
sites are also subject to announced and
unannounced audits by customers and
external bodies. Information from all these
verification processes is fed back into our
quality management systems so that we
can take prompt corrective and preventative
action if required.
The Group’s food safety performance is
presented at each Management Board meeting.
Focus areas
We remain focused on accident prevention
and empower our employees to do the
right thing by raising risk awareness,
providing relevant training and sharing best
practice. We train and engage our people to
develop a proactive safety awareness and
prevention culture.
We carry out in-depth annual H&S audits at
all UK sites to ensure that our workplaces
are safe and appropriate, that consistent
systems and controls are in place, and
that each business has a live action plan
to address its highest risks.
H&S performance indicators and annual
H&S audit results are reported monthly to
the Management Board. Our main Group KPI
is major accidents per 100,000 employees
and this reduced by 59% in 2014 compared
to 2013. We also measure our performance
against industry figures and continue to
outperform this benchmark – by 79% in 2014.
page 11 for more information.
Raw material risk assessment procedures
Focus areas
to encompass new and emerging risks
Managing risks associated with people
Employee recruitment and development
processes to meet future technical needs
and vehicles
Fire prevention
Information systems to enhance the
Further reinforcement of an accident
analysis and use of our technical data
prevention culture
ANN SAVAGE
GROUP TECHNICAL DIRECTOR
RESPONSIBLE FOR:
Food Safety & Integrity, Health & Safety
and Environment
PIPPA GREENSLADE
GROUP HR DIRECTOR
RESPONSIBLE FOR:
Our People and Communities
MICROBIOLOGY TESTING
OUR H&S PERFORMANCE
59%
Reduction in major accidents per
100,000 employees in 2014.
Our Central Laboratory based in Holbeach carries
out our microbiology testing requirements.
ar14.bakkavor.com / 31
ENVIRONMENT
We manage the direct impacts of our
businesses on the environment and focus
on those areas that are most material to
our operations.
OUR PEOPLE
We ensure our people’s valuable skills
and talents are used and developed to
support the Group’s objectives.
COMMUNITIES
We work with our communities to
understand and respond to their concerns,
as well as support their sustainable
development.
FOCUSED ON ENVIRONMENTAL EFFICIENCY
STRATEGIC PEOPLE MANAGEMENT
LOCAL IMPACT
We encourage environmental efficiency through
a Group-wide focus on resource management
supported by our Group Environmental Policy.
Through this focus we have identified that both
waste and water recovery are two key areas
where we can make significant improvements.
In 2014 we sent 0.3% of our UK waste to
landfill against an ultimate target of zero, and
we became more efficient in segregating waste,
with a 30% year-on-year increase in food
waste sent to anaerobic digestion plants.
We also optimise our water efficiency by
minimising usage, increasing water recycling,
and assessing and refining on-site wastewater
treatment processes. For example, in the
production of leafy salads we use and discharge
a relatively high amount of water. Tilmanstone
Salads has recently installed a recycled water
treatment plant which has reduced its water
footprint by 75%, lowered its mains water
and trade effluent disposal costs, and improved
long-term water security for the site and its
local community.
Focus areas
Integrating waste information into existing
management systems
Continued improvement in water recycling
rates at water-intensive businesses
Site-specific initiatives to reduce energy
and transport costs
We focus on the following four areas:
talent management, reward and engagement,
learning and development and digital HR.
We manage existing talent and attract new
talent to the business by promoting our unique
culture and values internally and in our
communities, highlighting Bakkavor as a great
place to work. We also want to motivate and
retain our people by recognising and rewarding
their valuable contribution, engaging openly
with them and helping them grow their
careers through the learning and development
opportunities which we can support them
with. With a growing International presence,
this now includes overseas opportunities
for our people. To support these approaches
we continue to develop and simplify our HR
systems and processes to widen access to
online information and training.
Focus areas
Supporting local communities through
targeted employment schemes and
partnerships
Working with our Site Employee
Forums to improve our open employee
communication
Rolling out our ‘Recipes for Success’
management programme
Introducing online self-service HR
applications and e-learning
We believe our local business teams are
best placed to understand the needs of their
communities and support local initiatives.
We recognise, reward and celebrate
their community engagement through our
annual Group Responsibility Awards and
by communicating their achievements
both internally and externally.
We also support relevant national campaigns
that focus on the sustainability of the food
industry and rely upon the support of
manufacturers to help people develop the right
skills and capabilities for gaining employment.
At the end of 2014 the Group entered into
partnership with the Prince’s Trust. Working
with them, we aim to improve the work
prospects of young, unemployed people in
our local communities, and those struggling
at school and at risk of exclusion.
Focus areas
Concentrating support on local community
causes close to our business sites
Continued collaboration to promote the
sustainable growth of the food industry
Ongoing projects as part of our four-year
partnership with the Prince’s Trust
REDUCING OUR WASTE
FEEDING BRITAIN’S FUTURE
SUPPORTING YOUNG ROLE MODELS
0.3%
UK waste sent to landfill in 2014,
against an ultimate target of zero.
Shane Perry was recruited by our Welcome
Foods business following our involvement in
IGD’s ‘Feeding Britain’s Future’ campaign.
Bakkavor Desserts Newark sponsored
Nottinghamshire’s Young Person of the Year (YOPEY),
recognising young heroes across the county.
32 / Bakkavor Annual Report and Accounts 2014
Board of Directors
RUNNING OUR BUSINESS WITH INTEGRITY
LYDUR GUDMUNDSSON
GROUP CHAIRMAN
AGUST GUDMUNDSSON
CHIEF EXECUTIVE OFFICER
HALLDOR B. LUDVIGSSON
NON-EXECUTIVE DIRECTOR
Lydur founded Bakkavor Group with his
brother Agust in 1986 and has served
on its Board of Directors since it was
founded. He became Group Chairman
of the Board of Directors in 2006, before
which he served as Chief Executive
Officer of Bakkavor Group. Lydur was
educated at the Commercial College
of Iceland.
Agust founded Bakkavor Group with
his brother Lydur in 1986 and has served
on its Board of Directors since it was
founded. He became Chief Executive
Officer of Bakkavor Group in 2006,
before which he served as the Company’s
Executive Chairman. Agust was educated
at the College of Armuli in Reykjavík,
Iceland.
Halldor was elected to the Bakkavor
Group Board of Directors in May 2010.
He serves as a Managing Director
at Arion Banki’s investment banking
division. Before Halldor joined the bank,
he held various management positions,
including serving as the CEO of Maritech,
an international technology company.
He holds a degree in Mechanical
Engineering and a BSc in Computer
Science from the University of Iceland.
He is a member of the Board of Valitor hf.,
Atorka hf., Klakki ehf. and Interbulk plc.
BJARNI TH. BJARNASON
NON-EXECUTIVE DIRECTOR
GUDMUNDUR I. SIGURDSSON
NON-EXECUTIVE DIRECTOR
Bjarni was elected to the Group´s Board
of Directors in May 2010. He is the Deputy
CEO and one of the founders of Arctica
Finance hf., a securities company in
Iceland. Bjarni has held various corporate
advisory positions in Icelandic banks, most
recently as head of corporate advisory
at Landsbanki from 2003 to 2008. He
is a member of the Board of Arvakur hf.,
Byrjun ehf., Arctica Eignarhaldsfelag ehf.,
Viti fjarfestingafelag ehf., Þorsmork ehf.,
BG12 GP hf. and BG12 slhf. Bjarni holds
a BSc degree in Mechanical Engineering
from the University of Iceland and an MBA
from Southern Methodist University.
Gudmundur was elected to the
Bakkavor Group Board of Directors on
25 September 2012. From May 2010
to September 2012, he served as an
alternate Director to the Bakkavor Group
Board. Gudmundur is a partner at Lex
law offices, an Icelandic legal firm, where
he is an Attorney at Law. He holds a
Cand jur. degree from the Faculty of
Law of the University of Iceland and a
Master’s degree in Law (LL.M) from Duke
University School of Law. Gudmundur is
admitted to practise before the District
and Supreme Courts of Iceland.
Management Board
A STRONG TEAM WITH SKILLS & EXPERIENCE
ar14.bakkavor.com / 33
AGUST GUDMUNDSSON
CHIEF EXECUTIVE OFFICER
PETER GATES
CHIEF FINANCIAL OFFICER
MIKE EDWARDS
CHIEF OPERATING OFFICER, UK
ANN SAVAGE
GROUP TECHNICAL DIRECTOR
Agust founded Bakkavor
Group with his brother Lydur
in 1986 and has served on
its Board of Directors since
it was founded. He became
Chief Executive Officer of
Bakkavor Group in 2006,
before which he served as
the company’s Executive
Chairman. Agust was
educated at the College of
Armuli in Reykjavík, Iceland.
Peter was appointed CFO
in November 2010. He has
worked in a number of
international companies,
including Saatchi & Saatchi
Co. plc and Avis Europe plc.
Peter has over 31 years’
experience in corporate
finance. He is a Chartered
Accountant and a member
of the Association of
Corporate Treasurers.
Mike joined Bakkavor in 2001.
Prior to taking up his current
role in January 2014, he was
Managing Director of Meal
Solutions and has been on
the Management Board since
March 2011. Mike has over
26 years’ experience in the
food sector. Prior to joining
Bakkavor he worked at United
Biscuits and Heinz.
Ann has over 16 years’
service within the Group
and was appointed Group
Technical Director on the
Management Board in 2004.
She has over 35 years’
experience in technical,
research and development
and manufacturing roles
within the food industry.
PIPPA GREENSLADE
GROUP HR DIRECTOR
Pippa joined Bakkavor in
February 2013 and joined
the Management Board in
September 2013. She has
over 25 years’ experience
in HR with previous roles
as Global HR and Business
Services Director at Cadbury
Schweppes and Global
HR Director for the British
Council.
JOHN GORMAN
PRESIDENT & CEO OF
BAKKAVOR USA
John took up his current
position in January 2012 prior
to which he worked as the
Group’s Business Director
of Fresh Meal Solutions
in the UK. He has over 31
years’ experience in chilled
food, 24 of which have been
at Bakkavor and Geest.
IVAN CLINGAN
MANAGING DIRECTOR,
FRESH CONVENIENCE
Ivan has been with the
Group since 1990 and
was appointed to the
Management Board in March
2011. He has 28 years’
experience in the food
sector and prior to joining
Bakkavor he worked at
Nestlé. Ivan is also a
Management Accountant.
EINAR GUSTAFSSON
MANAGING DIRECTOR,
BAKKAVOR ASIA
Einar was appointed Managing
Director for Bakkavor Asia in
2005 and has served within
the Group for ten years. He
successfully turned around
two businesses in the seafood
industry and has a background
in management consulting
with Deloitte.
34 / Bakkavor Annual Report and Accounts 2014
Corporate Governance
AT BAKKAVOR, WE BELIEVE
THAT EFFECTIVE GOVERNANCE IS
REALISED THROUGH LEADERSHIP
AND COLLABORATION.
OUR GOVERNANCE FRAMEWORK
We operate within a governance framework
that reflects our business structure, culture and
values and which we believe identifies all the
elements of a sound approach to governance
and responsibility.
The Board, together with the Management
Board, uses the governance framework to
set and monitor governance and responsibility
objectives, identify improvement opportunities
and ensure that activities align with business
strategy. Through this framework we provide
assurance to all our stakeholders that Bakkavor
is a well-managed, responsible company.
Each element of the governance framework
is detailed below.
The Group Board retains ultimate responsibility
for upholding corporate governance standards
and determining the strategic objectives of the
Group. The Management Board implements
the strategic objectives of the Group Board,
determines investment policies, agrees
on performance criteria and delegates to
management of the Group operations the
detailed planning and implementation of
those objectives and policies in accordance
with appropriate risk parameters. It monitors
compliance with policies and achievement
against objectives by holding management
accountable for its activities through monthly
and quarterly performance reporting and
budget updates. The Management Board
receives regular presentations from Heads
of key Group functions, including Marketing,
Human Resources and Legal, enabling it to
explore specific issues and developments
in greater detail.
The governance framework is reinforced
across the organisation and addresses
stakeholder interests through the five
Bakkavor values, which define our approach
to all aspects of our business. Our values
are Customer care, Can Do attitude, Team
work, Innovation and Getting it right, keeping
it right. These values are fundamental to our
ability to carry out our day-to-day business
with integrity. We recruit people and reward
all managers against their ability to demonstrate
Bakkavor values.
ABOUT OUR GROUP BOARD
The majority of the Board Directors were
non-executive members during the financial
reporting period. It is considered that the size
and composition of the Board of Directors
makes it possible for it to discharge its duties
efficiently and with integrity. Together, the
Board of Directors brings a valuable and
balanced range of experience as all members
hold senior positions in business. See page
32 for profiles of our Board of Directors.
BOARD MEETINGS
During the year under review six scheduled
Board meetings were held. Attendance
for all Board meetings during the year was
100% as detailed in the table opposite. In
advance of each regular Board meeting, the
Board members are provided with a Board
report which includes a comprehensive
report of the Group’s financial and operational
performance, and a broader market update.
Board members are informed about all
significant matters as they arise.
ar14.bakkavor.com / 35
See more about
our values online at
bakkavor.com/our-
values
MEETINGS AND ATTENDANCE
Lydur Gudmundsson Group Chairman
Agust Gudmundsson Chief Executive Officer
Bjarni Th. Bjarnason Non-Executive Director
Halldor B. Ludvigsson Non-Executive Director
Gudmundur I. Sigurdsson Non-Executive Director
Board appointment
Scheduled Board
by date1 meeting attendance
01/08/1986
01/08/1986
14/05/2010
14/05/2010
25/09/2012
6/6
6/6
6/6
6/6
6/6
RISK IDENTIFICATION AND MANAGEMENT
AUDIT COMMITTEE
AUDITORS
Our decentralised model empowers the
management of our businesses to identify,
evaluate and manage the risks they face
on a timely basis. Principal risks and internal
control procedures are assigned to key
members of the Management Board. It is
their responsibility to report to the Board
each month on the actions associated with
each key risk.
In 2014 we reported eight key risks, the
management of which is paramount to the
day-to-day running of our business and the
achievement of our long-term vision. We
continue to believe that all eight identified
risks remain key risks to the business. For
more information about these risks and why
they are deemed to be key, how we mitigate
them and who is responsible for managing
them see pages 14 to 15.
The Group has robust internal control and
risk management processes, which are
designed to provide assurance but which
cannot avoid all risks. The systems are
designed to manage rather than to eliminate
all possible risk and to provide reasonable,
but not absolute, assurance against material
misstatement or loss. These processes also
support management’s decision-making,
improve the reliability of business performance
and assist in the preparation of the Group’s
consolidated accounts.
The Board has delegated authority to the Audit
Committee, which comprises key management
across the business, to regularly monitor
internal controls. Each year the Audit Committee
meets to discuss and approve the nature and
scope of the audit programme for the year.
The Audit Committee then instructs the internal
audit function to undertake an agreed schedule
of audits, during which the effectiveness of
the controls operating within the business
are reviewed. The Group’s internal audit
function, which comprises both employees
and professionals from an external provider,
Baker Tilly, has the skills and experience
relevant to the operation of each business.
In addition to our internal audit function,
the completion of comprehensive internal
control questionnaires is required from
Financial Controllers within each business
unit. These self-assessment representations
are designed to ensure that any material
control breakdowns are highlighted. The
results of these representations are reviewed
by internal audit before being reported to
the Audit Committee.
The Audit Committee is also responsible
for the appointment of the Company’s
Auditor, Deloitte LLP. Annually, the Committee
reviews the relationships the Company has
with Deloitte LLP and considers the level of
non-audit services provided by the Auditor.
The engagement of Deloitte LLP for non-audit
services requires approval from the Group
Financial Controller and, if significant, the
Audit Committee, to ensure that any services
provided do not impair the objectivity of the
external Auditor. A list of non-audit services
provided by Deloitte LLP in 2014 and the
associated fees has been provided in note 6
of the Group’s financial statements.
ENGAGING WITH INVESTORS
The Board delegates the management of
Bakkavor’s investor engagement programmes
to our CEO, CFO and Head of External Affairs.
In 2014 the team ran a comprehensive
programme of events and held numerous
meetings and telephone calls with investors
and analysts.
Please refer to the Investor Relations section
on our website for further information and
key dates.
1
The appointment of Board members to the holding company of the Group, prior to the incorporation of Bakkavor Finance (2)
plc, in 2011. For further details of other Company appointments refer to the Directors’ biographies on page 32.
36 / Bakkavor Annual Report and Accounts 2014
Directors’ report
The Directors present their annual report
on the affairs of the Bakkavor Finance (2) plc
Group (the ‘Group’). This is accompanied by
the Financial Statements and Auditor’s Report
for the 52 weeks ended 27 December 2014.
Comparatives are for the 52 weeks ended
28 December 2013.
RESULTS FOR THE YEAR
The results of the Group for the year are
set out in the Group Income Statement.
The profit for the year after taxation and
exceptional items was £11.5 million (2013:
profit after tax of £6.3 million). Further
details of the Group’s financial performance
are outlined in the Financial Review on
pages 23 to 25.
IMPORTANT EVENTS SINCE THE END
OF THE FINANCIAL YEAR
On 12 January 2015, the Group completed
the acquisition of B. Robert’s Foods, a private
label fresh prepared foods manufacturer based
in Charlotte, North Carolina. This acquisition
is in line with Bakkavor’s strategy for the
US to build a growing presence in the fresh
prepared foods sector.
FUTURE DEVELOPMENTS
In a tough trading environment with low
market growth, the Group has made good
progress by increasing revenues, market
share, margins and cash generation. Whilst
these results to date are encouraging,
unprecedented changes in the UK grocery
market means that we expect challenging
trading conditions to persist. The Directors
are of the opinion, however, that the strategic
actions being implemented by management,
coupled with capacity and productivity
investments across the Group’s businesses,
put the Company in a stronger position
to compete with these pressures. Further
details on future prospects are outlined
on pages 1 to 31 of this Annual Report.
GOING CONCERN DISCLOSURE
EQUAL OPPORTUNITIES
The Directors, in their detailed consideration
of going concern, have reviewed the Group’s
future cash forecasts and revenue projections,
which they believe are based on prudent market
data and past experience. The Directors
considered the Group’s level of liquidity and
compliance with its financing arrangements.
At the date of this report the Group has
complied in all respects with the terms of its
borrowing agreements, including its financial
covenants, and forecasts to continue to do
so. Furthermore, the Group’s forecasts and
projections, taking account of reasonably
possible changes in trading performance,
show that the Group should be able to operate
within the level of its current facilities.
Consequently, the Directors have a reasonable
expectation that the Company and the Group
have adequate resources to meet their liabilities
as they fall due for a period of at least 12 months
from the date of approval of the financial
statements. For this reason, they continue
to adopt the going concern basis in preparing
the financial statements.
RESEARCH AND DEVELOPMENT
The main focus of the Group’s research
and development expenditure is product
innovation. Research and development
expenditure totalled £7.9 million in the year
(2013: £7.9 million).
EMPLOYEE INVOLVEMENT
During the financial year we continued to
provide open channels of communication
between employees and management
through regular Site Employee Forums (SEFs)
and the annual Group Employee Forum (GEF).
At the GEF, matters of common concern to
employees are discussed (including updates
on the Group’s financial performance) and
learnings, best practice and ideas are shared.
This enables positive policy development
and the communication and discussion of
operational changes.
The Group is an equal opportunities
employer. Equal opportunities are offered
to all regardless of race, colour, nationality,
ethnic origin, sex (including gender
reassignment), marital or civil partnership
status, disability, religion, belief, sexual
orientation, pregnancy and maternity, age
or trade union membership. All candidates
and employees are treated equally in respect
of recruitment, promotion, training, pay and
other employment policies and conditions.
All decisions are based on relevant merit
and abilities.
DISABLED EMPLOYEES
The Group gives full and fair consideration
to employment applications made by people
with disabilities. We offer equal opportunity
to all disabled candidates and employees
who have a disability or who become disabled
during the course of their employment.
A full assessment of the individual’s needs is
undertaken and reasonable adjustments are
made to the work environment and/or practices
in order to assist those with disabilities.
OVERSEAS SUBSIDIARIES
Information on the Company’s subsidiaries
is set out in note 9 to the Company’s financial
statements.
DIRECTORS
The Directors who served throughout the
period and to the date of this Report were
as follows:
A Gudmundsson (appointed 21 January 2011)
L Gudmundsson (appointed 7 March 2011)
B Bjarnason (appointed 7 March 2011)
H Ludvigsson (appointed 7 March 2011)
G Sigurdsson (appointed 25 September 2012)
The Company has made qualifying third–party
indemnity provisions for the benefit of
Directors which remain in force at the date
of this report.
ar14.bakkavor.com / 37
DIVIDENDS
STATEMENT OF DIRECTORS’ RESPONSIBILITIES
STRATEGIC REPORT
In accordance with section 414A of the
Companies Act 2006 (Strategic Report and
Directors’ Report) Regulations 2013, as
a large private company, Bakkavor Finance
(2) plc Group (the ‘Group’), has prepared
a Strategic Report, which can be found
on pages 1 to 25 of this Annual Report.
Further information about employee and
environmental matters can be found on pages
28 to 31 in the Our responsibilities section.
The Strategic Report was approved by the
Board of Directors on 11 February 2015.
By order of the Board
A Gudmundsson
Director
11 February 2015
The Directors do not propose payment
of a dividend for the 52 weeks ended
27 December 2014 (2013: £nil).
FINANCIAL RISK MANAGEMENT
POLICIES AND OBJECTIVES
Information on the Group’s financial risk
management objectives and policies and on
the exposure of the Group to relevant risks
in respect of financial instruments is set out
in the Principal risks section and in note 29
(Financial Instruments).
AUDITORS
DISCLOSURE OF INFORMATION TO AUDITOR
Each of the persons who is a Director at
the date of approval of this Annual Report
confirms that:
so far as the Director is aware, there is
no relevant audit information of which the
Company’s Auditor is unaware; and
the Director has taken all the steps that
he ought to have taken as a Director
in order to make himself aware of any
relevant audit information and to establish
that the Company’s Auditor is aware
of that information.
This confirmation is given and should be
interpreted in accordance with the provisions
of s418(2) of the Companies Act 2006.
Deloitte LLP has expressed its willingness to
continue in office as Auditor and a resolution
to reappoint Deloitte LLP will be proposed at
the Company’s Annual General Meeting.
The Directors are responsible for preparing
the Annual Report and the financial
statements in accordance with applicable
law and regulations. Company law requires
the Directors to prepare financial statements
for each financial year. Under that law
the Directors have elected to prepare the
financial statements in accordance with
International Financial Reporting Standards
(IFRSs) as adopted by the European Union.
Under Company law the Directors must
not approve the financial statements unless
they are satisfied that they give a true and
fair view of the state of affairs of the Company
and the Group and of the profit or loss of
the Company and the Group for that period.
In preparing these financial statements,
International Accounting Standard 1 requires
that Directors:
properly select and apply accounting policies;
present information, including accounting
policies, in a manner that provides relevant,
reliable, comparable and understandable
information;
provide additional disclosures when
compliance with the specific requirements
in IFRSs is insufficient to enable users
to understand the impact of particular
transactions, other events and conditions on
the entity’s financial position and financial
performance; and
make an assessment of the Company and
the Group’s ability to continue as a going
concern.
The Directors are responsible for keeping
adequate accounting records that are
sufficient to show and explain the Group’s
transactions and disclose with reasonable
accuracy at any time the financial position
of the Company and the Group and enable
them to ensure that the financial statements
comply with the Companies Act 2006. They
are also responsible for safeguarding the
assets of the Group and hence for taking
reasonable steps for the prevention and
detection of fraud and other irregularities.
CHARGRILLING OVEN
AT CUCINA SANO IN OLD LEAKE,
LINCOLNSHIRE
Independent auditor’s report
ar14.bakkavor.com / 39
TO THE MEMBERS OF BAKKAVOR FINANCE (2) PLC
OPINION ON FINANCIAL STATEMENTS
We have audited the financial statements of Bakkavor Finance
(2) plc (the ‘Company’) and its subsidiaries (the ‘Group’) for the
52 weeks ended 27 December 2014 (‘period’) which comprise the
consolidated income statement, the consolidated statement of
comprehensive income and expense, the consolidated statement
of financial position, the consolidated statement of changes in
equity, the consolidated statements of cash flows, and the related
notes 1 to 39, company income statement, company statement
of changes in equity, company statement of financial position,
company statement of cash flows and the related notes 1 to 14.
The financial reporting framework that has been applied in their
preparation is applicable law and International Financial Reporting
Standards (IFRSs) as adopted by the European Union.
This report is made solely to the company’s members, as a body,
in accordance with Chapter 3 of Part 16 of the Companies Act
2006. Our audit work has been undertaken so that we might state
to the company’s members those matters we are required to state
to them in an auditor’s report and for no other purpose. To the fullest
extent permitted by law, we do not accept or assume responsibility
to anyone other than the company and the company’s members
as a body, for our audit work, for this report, or for the opinions
we have formed.
RESPECTIVE RESPONSIBILITIES OF DIRECTORS AND AUDITOR
As explained more fully in the Directors’ Responsibilities Statement,
the directors are responsible for the preparation of the financial
statements and for being satisfied that they give a true and fair view.
Our responsibility is to audit and express an opinion on the financial
statements in accordance with applicable law and International
Standards on Auditing (UK and Ireland). Those standards require
us to comply with the Auditing Practices Board’s Ethical Standards
for Auditors.
SCOPE OF THE AUDIT OF THE FINANCIAL STATEMENTS
An audit involves obtaining evidence about the amounts and
disclosures in the financial statements sufficient to give reasonable
assurance that the financial statements are free from material
misstatement, whether caused by fraud or error. This includes an
assessment of: whether the accounting policies are appropriate to
the Group’s and the parent company’s circumstances and have been
consistently applied and adequately disclosed; the reasonableness
of significant accounting estimates made by the directors; and the
overall presentation of the financial statements. In addition, we read
all the financial and non-financial information in the annual report to
identify material inconsistencies with the audited financial statements
and to identify any information that is apparently materially incorrect
based on, or materially inconsistent with, the knowledge acquired
by us in the course of performing the audit. If we become aware of
any apparent material misstatements or inconsistencies we consider
the implications for our report.
In our opinion the financial statements:
give a true and fair view of the state of the Group’s and of the parent
Company’s affairs as at 27 December 2014 and of the Group’s profit
and Company result for the period then ended;
have been properly prepared in accordance with IFRSs as adopted
by the European Union; and
have been prepared in accordance with the requirements of the
Companies Act 2006.
SEPARATE OPINION IN RELATION TO IFRSS AS ISSUED BY THE IASB
As explained in Note 2 to the financial statements, the Group
in addition to applying IFRSs as adopted by the European Union,
has also applied IFRSs as issued by the International Accounting
Standards Board (IASB).
In our opinion the financial statements comply with IFRSs as issued
by the IASB.
OPINION ON OTHER MATTER PRESCRIBED BY THE COMPANIES ACT 2006
In our opinion the information given in the Strategic Report and
the Directors’ Report for the financial year for which the financial
statements are prepared is consistent with the financial statements.
MATTERS ON WHICH WE ARE REQUIRED TO REPORT BY EXCEPTION
We have nothing to report in respect of the following matters where
the Companies Act 2006 requires us to report to you if, in our opinion:
adequate accounting records have not been kept by the parent
company, or returns adequate for our audit have not been received
from branches not visited by us; or
the parent company financial statements are not in agreement with
the accounting records and returns; or
certain disclosures of directors’ remuneration specified by law are
not made; or
we have not received all the information and explanations we
require for our audit.
Christopher Robertson
(Senior statutory auditor)
for and on behalf of Deloitte LLP
Chartered Accountants and Statutory Auditor
Birmingham, UK
11 February 2015
40 / Bakkavor Annual Report and Accounts 2014
Consolidated income statement
52 WEEKS ENDED 27 DECEMBER 2014
£ million
Continuing operations
Revenue
Cost of sales
Gross profit
Distribution costs
Other administrative costs
Exceptional items (net)
Royalty charge
Impairment of assets
Total administrative costs
Profit on disposal of subsidiary
Share of results of associates after tax
Operating profit/(loss)
Investment revenue
Finance costs
Other gains and (losses)
Profit/(loss) before tax
Tax
Profit/(loss) for the period from continuing operations
Discontinued operations
Profit for the period from discontinued operations
Profit/(loss) for the period
Attributable to:
Equity holders of the parent
Non-controlling interests
52 weeks ended 27 December 2014
Restated*
52 weeks ended 28 December 2013
Before
non-
recurring
items
Non-
recurring
items
Before
non-
recurring
items
Non-
recurring
items
Total
1,692.6
(1,236.3)
456.3
(80.2)
(299.9)
–
(1.2)
–
–
–
–
–
–
(6.6)
–
(4.1)
1,692.6
1,649.8
(1,236.3)
(1,208.8)
456.3
441.0
(80.2)
(80.5)
(299.9)
(297.7)
–
–
–
–
–
(6.6)
(1.2)
(4.1)
–
(1.2)
–
(1.7)
–
(21.7)
Total
1,649.8
(1,208.8)
441.0
(80.5)
(297.7)
(1.7)
(1.2)
(21.7)
(301.1)
(10.7)
(311.8)
(298.9)
(23.4)
(322.3)
–
1.0
76.0
0.1
(53.3)
1.7
24.5
(5.7)
18.8
–
18.8
18.1
0.7
18.8
1.8
–
(8.9)
–
–
–
(8.9)
1.6
(7.3)
–
(7.3)
(7.3)
–
(7.3)
1.8
1.0
67.1
0.1
(53.3)
1.7
15.6
(4.1)
11.5
–
11.5
10.8
0.7
11.5
–
1.2
62.8
0.1
(59.0)
(1.8)
2.1
5.9
8.0
3.6
11.6
11.6
–
11.6
1.8
–
(21.6)
–
–
–
(21.6)
0.5
(21.1)
15.8
(5.3)
(5.3)
–
(5.3)
1.8
1.2
41.2
0.1
(59.0)
(1.8)
(19.5)
6.4
(13.1)
19.4
6.3
6.3
-
6.3
Notes
4,5
7
8
32
18
5,10
11
12
13
6
31
* The comparatives for the 52 weeks ended 28 December 2013 have been restated to reflect the adoption of IAS 19 (revised 2011) ‘Employee Benefits’ as set out in notes 2
and 36.
Consolidated statement of
comprehensive income and expense
52 WEEKS ENDED 27 DECEMBER 2014
ar14.bakkavor.com / 41
£ million
Profit for the period
Other comprehensive income/(expense)
Items that will not be reclassified subsequently to income statement:
Actuarial gain/(loss) on defined benefit pension schemes
Tax relating to components of other comprehensive income
Items that may be reclassified subsequently to income statement:
Exchange differences on translation of foreign operations
Exchange differences on translation of discontinued foreign operations
Net exchange losses/(gains) recycled to income statement on disposal of subsidiaries
Total comprehensive income/(expense)
Attributable to:
Equity holders of the parent
Non-controlling interests
52 weeks
ended
Restated*
52 weeks
ended
27 December 28 December
2013
2014
Notes
36
13
32
11.5
6.3
0.3
–
0.3
0.6
–
1.7
2.3
14.1
13.8
0.3
14.1
(11.1)
2.6
(8.5)
(0.6)
0.1
(4.7)
(5.2)
(7.4)
(7.4)
–
(7.4)
* The comparatives for the 52 weeks ended 28 December 2013 have been restated to reflect the adoption of IAS 19 (revised 2011) ‘Employee Benefits’ as set out in notes 2
and 36.
42 / Bakkavor Annual Report and Accounts 2014
Consolidated statement of financial position
27 DECEMBER 2014
£ million
Non-current assets
Goodwill
Other intangible assets
Property, plant and equipment
Interests in associates
Other investments
Retirement benefit asset
Current assets
Inventories
Trade and other receivables
Cash and cash equivalents
Derivative financial instruments
Assets classified as held for sale
Total assets
Current liabilities
Trade and other payables
Current tax liabilities
Borrowings
Obligations under finance leases
Provisions
Derivative financial instruments
Liabilities associated with assets classified as held for sale
Non-current liabilities
Trade and other payables
Borrowings
Obligations under finance leases
Provisions
Deferred tax liabilities
Total liabilities
Net assets
Equity
Share capital
Share premium
Merger reserve
Capital reserve
Translation reserve
Retained earnings
Shareholder’s equity
Non-controlling interest
Total equity
Notes
27 December 2014
28 December 2013
14
15
16
18
19
36
20
21
22
24
27
23
26
28
24
27
23
26
28
25
30
30
30
30
30
31
642.1
9.4
277.8
10.9
0.1
6.7
947.0
64.3
201.3
24.6
0.5
290.7
–
290.7
1,237.7
(364.1)
(18.3)
(8.8)
(0.4)
(0.6)
(6.9)
(399.1)
–
(399.1)
(0.2)
(485.4)
(1.7)
(11.5)
(16.9)
(515.7)
(914.8)
322.9
0.1
315.2
45.2
4.0
17.5
(67.9)
314.1
8.8
322.9
644.4
18.3
264.7
10.0
0.1
2.6
940.1
58.5
189.0
45.0
0.3
292.8
7.0
299.8
1,239.9
(315.5)
(17.7)
(43.2)
(0.4)
(0.5)
(8.0)
(385.3)
(5.2)
(390.5)
(0.1)
(519.0)
(2.2)
(11.5)
(15.1)
(547.9)
(938.4)
301.5
0.1
315.2
45.2
4.0
14.8
(77.8)
301.5
–
301.5
The financial statements of Bakkavor Finance (2) plc and the accompanying notes, which form an integral part of the consolidated financial statements,
were approved by the Board of Directors on 11 February 2015. They were signed on behalf of the Board of Directors by:
A Gudmundsson
Director
Consolidated statement of changes in equity
52 WEEKS ENDED 27 DECEMBER 2014
ar14.bakkavor.com / 43
£ million
Equity attributable to owners of the parent
Share
capital
Share
premium
Merger
reserve
Capital Translation
reserve
reserve
Restated
Retained
earnings
Non
controlling
interests
Total
Balance at 30 December 2012
0.1
315.2
45.2
4.0
Profit for the period
Other comprehensive expense for the period
Total comprehensive expense for the period
–
–
–
–
–
–
–
–
–
–
–
–
Balance at 28 December 2013
0.1
315.2
45.2
4.0
Profit for the period
Other comprehensive income/(expense) for the period
Total comprehensive income for the period
Disposal of investment (note 32)
Balance at 27 December 2014
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
0.1
315.2
45.2
4.0
20.0
–
(5.2)
(5.2)
14.8
–
2.7
2.7
–
17.5
(75.6)
308.9
6.3
(8.5)
(2.2)
(77.8)
10.8
0.3
11.1
(1.2)
(67.9)
6.3
(13.7)
(7.4)
301.5
10.8
3.0
13.8
(1.2)
314.1
–
–
–
–
–
0.7
(0.4)
0.3
8.5
8.8
Total
equity
308.9
6.3
(13.7)
(7.4)
301.5
11.5
2.6
14.1
7.3
322.9
44 / Bakkavor Annual Report and Accounts 2014
Consolidated statement of cash flows
52 WEEKS ENDED 27 DECEMBER 2014
£ million
52 weeks
ended
52 weeks
ended
27 December 28 December
2013
2014
Notes
Net cash generated from operating activities
33
86.4
48.1
Investing activities:
Interest received
Dividends received from associates
Purchases of property, plant and equipment
Proceeds on disposal of property, plant and equipment
Payment of deferred consideration
Disposal of subsidiary net of cash disposed of
Disposal of investment
Net cash used in investing activities
Financing activities:
Increase in borrowings
Repayments of borrowings
Repayments of obligations under finance leases
Net cash used in financing activities
Net (decrease)/increase in cash and cash equivalents
Cash and cash equivalents at beginning of period
Effect of foreign exchange rate changes
Cash and cash equivalents at end of period
Attributable to:
Continuing operations
Assets held for sale
32
32
0.1
0.6
0.1
0.6
(50.8)
(33.3)
1.6
–
3.5
7.3
(37.7)
1.6
(72.6)
(0.5)
(71.5)
(22.8)
47.5
(0.1)
24.6
24.6
–
24.6
0.5
(0.1)
27.0
–
(5.2)
259.9
(285.2)
(0.5)
(25.8)
17.1
31.1
(0.7)
47.5
45.0
2.5
47.5
Notes to the consolidated financial statements
52 WEEKS ENDED 27 DECEMBER 2014
ar14.bakkavor.com / 45
1
GENERAL INFORMATION
Bakkavor Finance (2) plc (the ’Company’) is a Public Limited Company whose ultimate parent Company and controlling party is Bakkavor Group Limited,
a Company registered in the United Kingdom. The address of the registered office is given in note 39.
The principal activities of the Company and its subsidiaries (the ’Group’) comprise preparation and marketing of fresh prepared foods and the marketing
and distribution of fresh produce. These activities are undertaken in the UK, Continental Europe, Asia and the US and products are primarily sold through
high street supermarkets.
In the current year, the Group has adopted the following Standards and Interpretations with no material impact on the financial statements of the Group,
with the exception of the adoption of IAS 19 (revised 2011) ‘Employee Benefits’, further details of which can be found in note 2.
New or revised standards:
IFRS 10
IFRS 11
IFRS 12
IFRS 13
IAS 19
IAS 27
IAS 28
Consolidated Financial Instruments (May 2011)
Joint Arrangements (May 2011)
Disclosures of Interests in Other Entities (May 2011)
Fair Value Measurement (May 2011)
Employee Benefits (June 2011)
Separate Financial Statements (May 2011)
Investments in Associates and Joint Ventures (May 2011)
Amendments:
IFRS 1
IFRS 7
Various
Various
Government loans (Mar 2012)
Disclosures: Offsetting Financial Assets and Financial Liabilities (Dec 2011)
Annual Improvements 2009 – 2011 cycle (May 2012)
Consolidated Financial Statements, Joint Arrangements and Disclosures of Interests in Other Entities: Transition Guidance
(June 2012)
At the date of authorisation of these financial statements, the following Standards and Interpretations which have not been applied in these financial
statements were in issue but not yet effective (and in some cases have not yet been adopted by the EU):
New or revised standards:
IFRS 9
IFRS 9
IFRS 9
IFRS 14
IFRS 15
IFRIC 21
Financial Instruments (Nov 2009 and Oct 2010)
Financial Instruments: Hedge Accounting and Amendments to IFRS 9, IFRS 7 and IAS 39 (Nov 2013)
Financial Instruments 2014 (Nov 2013)
Regulatory Deferral Accounts (Jan 2014)
Revenue from Contracts with Customers (May 2014)
Levies (May 2013)
Amendments:
IFRS 10 & IAS 28
IFRS 11
IAS 16 & IAS 38
IAS 16 & IAS 41
IAS 19
IAS 27
IAS 32
IAS 36
IAS 39
Various
Various
Various
Various
Sale or Contribution of Assets between an Investor and its Associate or Joint Venture (Sep 2014)
Accounting for Acquisitions of Interests in Joint Operations (May 2014)
Clarification of Acceptable Methods of Depreciation and Amortisation (May 2014)
Agriculture: Bearer Plants (June 2014)
Defined Benefit Plans: Employee Contributions (Nov 2013)
Equity Method in Separate Financial Statements (Aug 2014)
Presentation: Offsetting Financial Assets and Financial Liabilities (Dec 2011)
Recoverable Amount Disclosures for Non-Financial Assets (May 2013)
Novation of Derivatives and Continuation of Hedge Accounting (June 2013)
Annual Improvements 2010 – 2012 cycle (Dec 2013)
Annual Improvements 2011 – 2013 cycle (Dec 2013)
Annual Improvements 2012 – 2014 cycle (Sep 2014)
IFRS 10, IFRS 12 and IAS 27: Investment Entities (Oct 2012)
With the exception of IFRS 9 Financial Instruments, the Directors anticipate that the adoption of these Standards and Interpretations will have no material
impact on the financial statements of the Group.
46 / Bakkavor Annual Report and Accounts 2014
Notes to the consolidated financial statements
CONTINUED
2
SIGNIFICANT ACCOUNTING POLICIES
BASIS OF ACCOUNTING
The financial statements have been prepared in accordance with International Financial Reporting Standards (IFRSs) as issued by the International
Accounting Standards Board (IASB). The financial statements have also been prepared in accordance with IFRSs adopted by the European Union.
These financial statements are presented in Pounds Sterling because that is the currency of the primary economic environment in which the Group
operates. Foreign operations are included in accordance with the foreign currency policy set out below.
The financial statements have been prepared on the historical cost basis, except for the revaluation of financial instruments. The principal accounting
policies adopted are set out below.
During the 52 week period ended 27 December 2014, the Group has adopted IAS 19 (revised 2011) ‘Employee Benefits’. In accordance with IAS 8
‘Accounting Policies, Changes in Accounting Estimates and Errors’ the prior 52 week period ended 28 December 2013 consolidated income statement,
consolidated statement of comprehensive income, consolidated statement of changes in equity and the notes to the statement of cash flows have
been restated.
The adoption of this standard has had the following impact on the prior year:
£ million
Continuing operations
Reduction in profit for the period
Increase in Other comprehensive income
2013
(1.5)
1.5
As a result of the restatement, the EBITDA (which is stated before the tax impact of £0.4 million) for the 52 week period ended 28 December 2013 has
been reduced by £1.9 million.
GOING CONCERN
The Directors have reviewed the historical trading performance of the Group and the forecasts through to March 2016. See note 3, for the Directors’
consideration of Going Concern.
BASIS OF CONSOLIDATION
The Group financial statements comprise the financial statements of the parent undertaking and its subsidiary undertakings, together with the Group’s
share of the results of associated undertakings comprising a 53 or 52 week period ending on the Saturday nearest to 31 December. Where the fiscal year
2014 is quoted in these financial statements this relates to the 52 week period ended 27 December 2014. The fiscal year 2013 relates to the 52 week
period ended 28 December 2013.
SUBSIDIARIES
Subsidiary undertakings are included in the Group financial statements from the date on which control is achieved, and cease to be consolidated from
the date on which control is transferred out of the Group. Control is achieved when the Group is exposed, or have rights, to variable returns from its
involvement with the investee and has the ability to affect those returns through its power over the investee. The Group reassesses whether or not it
controls an investee when facts and circumstances indicate that there are changes to one or more of the elements of control.
When the Company has less than a majority of the voting rights of an investee, it considers all relevant facts and circumstances in assessing whether
or not it has power over the investee to direct the relevant activities of the investee unilaterally.
Non-controlling interests in subsidiaries are identified separately from the Group’s equity therein. The interests of non-controlling shareholders are
measured at the non-controlling interests’ proportionate share of the fair value of the acquiree’s identifiable net assets. Subsequent to acquisition,
the carrying amount of non-controlling interests is the amount of those interests at initial recognition plus the non-controlling interests’ share of
subsequent changes in equity. Total comprehensive income is attributed to non-controlling interests, even if this results in the non-controlling
interests having a deficit balance.
Changes in the Group’s interests in subsidiaries that do not result in a loss of control are accounted for as equity transactions. The carrying amount
of the Group’s interests and the non-controlling interests are adjusted to reflect the changes in their relative interests in the subsidiaries. Any difference
between the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or received is recognised directly
in equity and attributed to the owners of the Company.
Notes to the consolidated financial statements
CONTINUED
ar14.bakkavor.com / 47
2
SIGNIFICANT ACCOUNTING POLICIES CONTINUED
BUSINESS COMBINATIONS
Business acquisitions from third parties are accounted for using the acquisition method. The cost of the acquisition is measured at the aggregate of the
fair values, at the date of exchange, of assets given, liabilities incurred or assumed, and equity instruments issued by the Group in exchange for control of
the acquiree. The acquiree’s identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition under IFRS 3 are recognised at
their fair value at the acquisition date.
Goodwill arising on business combinations is recognised as an asset and initially measured at cost, being the excess of the cost of the business
combination over the Group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities recognised. If, after the
reassessment, the Group’s interest in the net fair value of the acquiree’s identifiable assets, liabilities and contingent liabilities exceeds the cost
of the business combination, the excess is recognised immediately in the income statement.
When the consideration in a business combination includes an asset or liability resulting from a contingent consideration arrangement, the contingent
consideration is measured at its acquisition date fair value and included as part of the consideration transferred. Changes in the fair value of the
contingent consideration are adjusted retrospectively, with corresponding adjustments against goodwill.
Where a business combination is achieved in stages, the Group’s previously-held interests in the acquired entity are re-measured to fair value at the
acquisition date (i.e. the date the Group attains control) and the resulting gain or loss, if any, is recognised in the income statement.
GOODWILL
Goodwill is initially recognised and measured as set out above in the business combinations note.
Goodwill is not amortised but is reviewed for impairment at least annually. For the purpose of impairment testing, goodwill is allocated to each of the
cash-generating units (CGUs) or groups of CGUs expected to benefit from the synergies of the combination. CGUs or groups of CGUs to which goodwill
has been allocated are tested for impairment annually, or more frequently when there is an indication that the unit may be impaired. If the recoverable
amount of the CGU is less than the carrying amount of the unit, the impairment loss is allocated first to reduce the carrying amount of any goodwill
allocated to the unit and then to the other assets of the unit pro-rata on the basis of the carrying amount of each asset in the unit. An impairment loss
recognised for goodwill is not reversed in a subsequent period.
On disposal of a subsidiary or associate, the attributable amount of goodwill is included in the determination of the profit or loss on disposal.
The Group’s policy for goodwill on the acquisition of an associate is described in the investment of associate note below.
INVESTMENTS IN ASSOCIATES
An investment in an associate is an entity over which the Group is in a position to exercise significant influence, through participation in the financial and
operating policy decisions of the investee. Significant influence is the power to participate in the financial and operating policy decisions of the investee
but is not control or joint control over those policies.
The results, assets and liabilities of associates are incorporated in these financial statements using the equity method of accounting. Investments in
associates are initially recognised in the statement of financial position at cost and adjusted thereafter by the Group’s share of the profit or loss and other
comprehensive income of the associate, less any impairment in the value of individual investments.
On acquisition of the investment, goodwill is the excess of cost of the investment over the Group’s share of the net fair value of the identifiable assets
and liabilities, which is included within the carrying amount of the investment. The entire carrying amount of the investment is tested for impairment, as
a single asset by comparing its recoverable amount with its carrying amount. Any impairment loss recognised forms part of the carrying amount of the
investment. Any reversal of that impairment loss is recognised in accordance with IAS 36 ‘Impairment of Assets’.
Where a Group company transacts with an associate of the Group, profits and losses are only recognised in the financial statements to the extent of
interests in the associate that are not related to the Group.
ASSETS HELD FOR SALE AND DISCONTINUED OPERATIONS
Disposal groups are classified as held for sale if their carrying amount will be recovered through a sale transaction rather than through continuing use.
This condition is regarded as met only when the sale is highly probable, the disposal group is available for immediate sale in its present condition and
management are committed to and expect to complete the sale within 12 months from the date of classification. Disposal groups classified as held for
sale are measured at the lower of carrying amount and fair value less costs to sell.
When the Group is committed to the loss of control of a subsidiary, through a sale transaction, all the assets and liabilities of that subsidiary are grouped
together, but not offset, to present amounts classified as assets and liabilities held for sale separately in the statement of financial position.
A discontinued operation is a component of an entity that has either been disposed of or is classified as held for sale and represents a separate major
line of business or geographical area of operation. A disposal group which qualifies as a discontinued operation is presented as a single amount and
shown separately from continuing operations in the income statement and statement of comprehensive income.
48 / Bakkavor Annual Report and Accounts 2014
Notes to the consolidated financial statements
CONTINUED
2
SIGNIFICANT ACCOUNTING POLICIES CONTINUED
REVENUE RECOGNITION
Revenue is measured at the fair value of the consideration received or receivable and represents amounts receivable for goods provided in the normal
course of business, net of discounts, VAT and other sales-related taxes.
The Group sells fresh prepared foods and fresh produce.
Revenue from the sale of these goods is recognised when all of the following conditions are satisfied:
• The Group has transferred to the buyer the significant risks and rewards of ownership of the goods;
• The Group retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold;
• The amount of revenue can be measured reliably;
• It is probable that the economic benefits associated with the transaction will flow into the entity;
• The costs incurred or to be incurred in respect of the transaction can be measured reliably.
As a result, revenue for the sale of these goods is generally recognised upon delivery to the customer.
LEASES
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee.
All other leases are classified as operating leases.
FINANCE LEASES
Assets held under finance leases are recognised as assets of the Group at their fair value or, if lower, at the present value of the minimum lease
payments, each determined at the inception of the lease. The corresponding liability to the lessor is included in the statement of financial position as a
finance lease obligation. Lease payments are apportioned between finance charges and reduction of the lease obligation so as to achieve a constant rate
of interest on the remaining balance of the liability. The interest element of the finance cost is charged to the income statement over the lease period.
OPERATING LEASES
Rentals payable under operating leases are charged to income on a straight-line basis over the term of the relevant lease. Benefits received and
receivable as an incentive to enter into an operating lease are also spread on a straight-line basis over the lease term.
FOREIGN CURRENCY
The individual financial statements of each Group company are presented in the currency of the primary economic environment in which it operates
(its functional currency). For the purpose of the consolidated financial statements, the results and financial position of each Group company are
expressed in Pounds Sterling, being the functional currency of the Company, and the presentation currency for the consolidated financial statements.
In preparing the financial statements of the individual companies, transactions in currencies other than the entity’s functional currency (foreign currencies)
are recorded at the rates of exchange prevailing on the dates of the transactions. At each statement of financial position date, monetary assets and
liabilities that are denominated in foreign currencies are retranslated at the rates prevailing on the statement of financial position date. Non-monetary
items carried at fair value that are denominated in foreign currencies are translated at the rates prevailing at the date when the fair value was determined.
Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.
Exchange differences arising on the settlement of monetary items, and on the retranslation of monetary items, are included in the income statement
for the period. Exchange differences arising on the retranslation of non-monetary items carried at fair value are included in the income statement for the
period except for differences arising on the retranslation of non-monetary items carried at historical cost of which gains and losses are recognised directly
in other comprehensive income.
For the purpose of presenting consolidated financial statements, the assets and liabilities of the Group’s foreign operations are translated at exchange
rates prevailing on the statement of financial position date. Income and expense items are translated at the annual average rate, unless exchange rates
fluctuate significantly during that period, in which case the exchange rates at the date of transactions are used. Exchange differences arising, if any, are
recognised in other comprehensive income and accumulated in the Group’s translation reserve.
On the disposal of a foreign operation, all of the accumulated exchange differences in respect of that operation attributable to the Group are reclassified
to the income statement. However, a partial disposal of a foreign operation where the Group does not lose control, results in the proportionate share of
accumulated exchange differences being re-attributed to non-controlling interests and is not recognised in the income statement.
Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated
at the closing rate. Exchange differences arising are recognised in other comprehensive income.
RESEARCH AND DEVELOPMENT
Research and development costs comprise all directly attributable costs necessary to create and produce new products which are both new in design
and those being modified. Expenditure on research and development is recognised as an expense in the period in which it is incurred.
Notes to the consolidated financial statements
CONTINUED
ar14.bakkavor.com / 49
2
SIGNIFICANT ACCOUNTING POLICIES CONTINUED
OPERATING PROFIT
Operating profit is stated after charging exceptional items (net), royalties, impairment of assets, disposal of subsidiaries and share of results of associates
but before investment revenue, finance costs and other gains and losses.
RETIREMENT BENEFIT OBLIGATIONS
DEFINED CONTRIBUTION PLANS
A defined contribution plan is a pension plan under which the Group pays fixed contributions into a separate entity, which then invests the contributions to
buy annuities for the pension liabilities as they become due based on the value of the fund and hence the Group has no legal or constructive obligations
to pay further contributions. Obligations for contributions to defined contribution pension plans are recognised as an expense in the income statement
as employee service is received. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in future payments is
available. Payments made to state-managed retirement benefit schemes are dealt with as payments to defined contribution schemes where the Group’s
obligations under the schemes are equivalent to those arising in a defined contribution retirement benefit scheme.
DEFINED BENEFIT PENSION PLANS
A defined benefit plan is a pension plan that defines the amount of pension benefit that an employee will receive on retirement, usually dependent on
factors such as age, years of service and compensation.
For defined benefit schemes, the cost of providing benefits is determined using the Projected Unit Credit Method, with actuarial valuations being carried
out at each statement of financial position date. Actuarial gains and losses are recognised in full in the period in which they occur. They are recognised
outside of the income statement and presented in the statement of comprehensive income.
Past service cost is recognised immediately to the extent that the benefits are already vested, and otherwise is amortised on a straight-line basis over
the average period until the benefits become vested.
The retirement benefit recognised in the statement of financial position represents the present value of the defined benefit obligation as adjusted for
unrecognised past service cost, and as reduced by the fair value of scheme assets. Any asset resulting from this calculation is limited to past service
cost, plus the present value of available refunds and reductions in future contributions to the scheme.
TAXATION
The tax expense represents the sum of the tax currently payable and deferred tax.
The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the income statement because it
excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The
Group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the statement of financial position date.
Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial
statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the statement of financial position
liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent
that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not
recognised if the temporary difference arises from the initial recognition of goodwill or from the initial recognition (other than in a business combination)
of other assets and liabilities in a transaction that affects neither the tax profit nor the accounting profit.
Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries and associates, except where the Group
is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future.
The carrying amount of deferred tax assets is reviewed at each statement of financial position date and reduced to the extent that it is no longer
probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.
Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised. Deferred tax is
charged or credited in the income statement, except when it relates to items charged or credited directly to other comprehensive income, in which case
the deferred tax is also dealt with in other comprehensive income.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when
they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis.
Where current and deferred tax arises from the initial accounting for a business combination, the tax effect is included in the accounting for the
business combination.
50 / Bakkavor Annual Report and Accounts 2014
Notes to the consolidated financial statements
CONTINUED
2
SIGNIFICANT ACCOUNTING POLICIES CONTINUED
PROPERTY, PLANT AND EQUIPMENT
All property, plant and equipment is stated in the statement of financial position at cost less any subsequent accumulated depreciation and subsequent
accumulated impairment losses.
Depreciation is charged so as to write off the cost or valuation of assets, other than land and properties under construction, over their estimated useful
lives, using the straight-line method, on the following bases:
Buildings – maximum period of 50 years
Plant and machinery – 1 to 20 years
Fixtures and equipment – 3 to 5 years
Freehold land is not depreciated. Most plant and machinery is depreciated over 12 years.
Assets held under finance leases are depreciated over their expected useful lives on the same basis as owned assets or, where shorter, over the term of
the relevant lease.
Reviews of the estimated remaining useful lives of and residual values of individual productive assets are performed annually, taking account of
commercial and technological obsolescence as well as normal wear and tear. All items of property, plant and equipment are reviewed for impairment
when there are indications that the carrying value may not be recoverable.
The gain or loss arising on the disposal or retirement of an asset is determined as the difference between the sale proceeds and the carrying amount of
the asset and is recognised in the income statement.
OTHER INTANGIBLE ASSETS
Intangible assets have finite useful lives over which the assets are amortised on a straight line basis. The amortisation charge for customer relationships
and customer contracts is recognised as an expense over 10 years.
IMPAIRMENT
The useful economic lives of intangible assets are determined based on a review of a combination of factors including the asset ownership rights and the
nature of the overall product life cycle.
Intangible assets and property, plant and equipment are tested for impairment when an event that might affect asset values has occurred. Examples
of such triggering events include significant planned restructuring, a major change in market conditions or technology, expectations of future operating
losses, or a significant reduction in cash flows.
An impairment loss is recognised, in the income statement, to the extent that the carrying amount cannot be recovered either by selling the asset or
by the discounted future earnings from operating the assets in accordance with IAS 36 ‘Impairment of Assets’.
INVENTORIES
Inventories are stated at the lower of cost and net realisable value. Cost comprises direct materials and, where applicable, direct labour costs and
those overheads that have been incurred in bringing the inventories to their present location and condition. Cost is calculated using the weighted average
method. Net realisable value represents the estimated selling price less all estimated costs of completion and costs to be incurred in marketing, selling
and distribution.
FINANCIAL ASSETS
All financial assets are recognised and derecognised on a trade date where the purchase or sale of a financial asset is under a contract whose terms
require delivery of the financial asset within the timeframe established by the market concerned, and are initially measured at fair value, plus transaction
costs, except for those financial assets classified as at fair value through profit or loss, which are initially measured at fair value.
Financial assets are classified into the following specified categories: financial assets at ‘fair value through profit or loss’ (FVTPL), and ‘loans and
receivables’. The classification depends on the nature and purpose of the financial assets and is determined at the time of initial recognition.
FINANCIAL LIABILITIES
Financial liabilities held by the Group are classified as other financial liabilities at amortised cost and derivatives at FVTPL.
LOANS AND RECEIVABLES
Trade receivables and other receivables that have fixed or determinable payments that are not quoted in an active market are classified as ‘loans and
receivables’. Loans and receivables are measured at amortised cost using the effective interest method, less any impairment. Interest income is
recognised by applying the effective interest rate, except for short term receivables when the recognition of interest would be immaterial.
Notes to the consolidated financial statements
CONTINUED
ar14.bakkavor.com / 51
2
SIGNIFICANT ACCOUNTING POLICIES CONTINUED
FINANCIAL LIABILITIES CONTINUED
OTHER FINANCIAL LIABILITIES
Other financial liabilities, including borrowings, are initially measured at fair value, net of transaction costs. Other financial liabilities are subsequently
measured at amortised cost using the effective interest method, with interest expense recognised on an effective yield basis.
EFFECTIVE INTEREST METHOD
Finance costs are recognised on an effective interest basis for debt instruments other than those financial liabilities designated as at FVTPL. The effective
interest method is a method of calculating the amortised cost of a debt instrument and of allocating finance costs over the relevant period.
The effective interest rate is the rate that exactly discounts estimated future cash payments through the expected life of the debt instrument, or, where
appropriate, a shorter period, to the net carrying amount on initial recognition.
FINANCIAL ASSETS AND FINANCIAL LIABILITIES AT FVTPL
Financial assets and financial liabilities are classified as at FVTPL when the financial asset/liability is either held for trading or it is designated as at FVTPL.
A financial asset/liability is classified as held for trading if:
• It has been acquired/incurred principally for the purpose of selling/disposal in the near term; or
• It is a part of a portfolio of identified financial instruments that the Group manages together and has a recent actual pattern of short-term profit-taking; or
• It is a derivative that is not designated and effective as a hedging instrument.
A financial asset/liability other than a financial asset/liability held for trading may be designated as at FVTPL upon initial recognition if:
• Such designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise; or
• The financial asset/liability forms part of a group of financial assets or financial liabilities or both, which is managed and its performance is evaluated on
a fair value basis, in accordance with the Group’s documented risk management or investment strategy, and information about the Group is provided
internally on that basis; or
• It forms part of a contract containing one or more embedded derivatives, and IAS 39 ‘Financial Instruments: Recognition and Measurement’ permits the
entire combined contract (asset or liability) to be designated as at FVTPL.
Financial assets/liabilities at FVTPL are stated at fair value, with any resultant gain or loss recognised in the income statement. The net gain or loss
recognised in the income statement incorporates any dividend or interest earned on the financial asset and interest paid on the financial liability. Fair
value is determined in the manner described in note 29.
IMPAIRMENT OF FINANCIAL ASSETS
Financial assets, other than those at FVTPL, are assessed for indicators of impairment at each statement of financial position date. Financial assets are
impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the
estimated future cash flows of the financial asset have been affected.
Objective evidence of impairment could include:
• significant financial difficulty of the issuer or counterparty; or
• default or delinquency in interest or principal payments; or
• it becoming probable that the borrower will enter bankruptcy or financial re-organisation.
For certain categories of financial assets such as trade receivables, assets that are assessed not to be impaired individually are, in addition, assessed for
impairment on a collective basis. Objective evidence of impairment for a portfolio of receivables could include the Group’s past experience of collecting
payments, an increase in the number of delayed payments in the portfolio past the average credit period, as well as observable changes in national and
local economic conditions that correlate with default on receivables. For financial assets carried at amortised cost, the amount of the impairment is the
difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the financial asset’s original effective
interest rate.
The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of trade receivables, where
the carrying amount is reduced through the use of an allowance account. When a trade receivable is considered uncollectible, it is written off against
the allowance account. Subsequent recoveries of amounts previously written off are credited against the allowance account. Changes in the carrying
amount of the allowance account are recognised in the income statement. If in a subsequent period, the amount of the impairment loss decreases and
the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed
through the income statement to the extent that the carrying amount of the asset at the date the impairment is reversed does not exceed what the
amortised cost would have been had the impairment not been recognised.
DERECOGNITION OF FINANCIAL ASSETS AND FINANCIAL LIABILITIES
The Group derecognises a financial asset only when the contractual rights to the cash flows from the asset expire; or it transfers the financial asset and
substantially all the risks and rewards of ownership of the asset to another entity. Financial liabilities are derecognised when, and only when the Group’s
obligations are discharged, cancelled or expire.
52 / Bakkavor Annual Report and Accounts 2014
Notes to the consolidated financial statements
CONTINUED
2
SIGNIFICANT ACCOUNTING POLICIES CONTINUED
DERIVATIVE FINANCIAL INSTRUMENTS
The Group’s activities expose it primarily to the financial risks of changes in foreign currency exchange rates and interest rates. The Group uses foreign
exchange forward contracts and interest rate swap contracts to manage these exposures. The Group does not use derivative financial instruments for
speculative purposes. The use of financial derivatives is governed by the Group’s policies approved by the Board of Directors, which provide written
principles on the use of financial derivatives. Changes in the fair value of derivative financial instruments are recognised in the income statement as
they arise. Derivatives embedded in other financial instruments or other host contracts are treated as separate derivatives when their risks and
characteristics are not closely related to those of host contracts and the host contracts are not carried at fair value, with gains or losses reported in the
income statement.
PROVISIONS
Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that the Group will be
required to settle that obligation and a reliable estimate can be made of the amount of the obligation.
The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the statement of financial
position date, taking into account the risks and uncertainties surrounding the obligation. Where a provision is measured using the cash flows estimated
to settle the present obligation, its carrying amount is the present value of those cash flows. When some or all of the economic benefits required to
settle a provision are expected to be recovered from a third party, a receivable is recognised as an asset if it is virtually certain that reimbursement will
be received and the amount of the receivable can be measured reliably.
A restructuring provision is recognised when the Group has developed a detailed formal plan for the restructuring and has raised a valid expectation
in those affected that it will carry out the restructuring by starting to implement the plan or announcing its main features to those affected by it.
The measurement of a restructuring provision includes only the direct expenditures arising from the restructuring, which are those amounts that
are both necessarily entailed by the restructuring and not associated with the ongoing activities of the entity.
Present obligations arising from onerous contacts are recognised and measured as provisions. An onerous contract is considered to exist where the
Group has a contract under which the unavoidable costs of meeting the obligations under the contract exceed the economic benefits expected to be
received under it.
CONTINGENT LIABILITIES
A contingent liability is a possible obligation that arises from past events and the existence of which will only be confirmed by the occurrence or
non-occurrence of one or more uncertain future events not wholly within the control of the Group or the amount of the obligation cannot be measured
reliably. A contingent liability is disclosed in the notes to the financial statements and is not recognised when the obligation is not probable. When an
outflow becomes probable, it is recognised as a provision.
3
CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY
CRITICAL JUDGEMENTS IN APPLYING THE GROUP’S ACCOUNTING POLICIES
The following are areas of particular significance to the Group’s financial statements and include the application of judgement, which is fundamental to
the compilation of a set of financial statements:
GOING CONCERN
The Directors, in their detailed consideration of going concern, have reviewed the Group’s future cash forecasts and revenue projections, which they
believe are based on prudent market data and past experience. The Directors considered the Group’s level of liquidity and compliance with its financing
arrangements. At the date of this report the Group has complied in all respects with the terms of its borrowing agreements, including its financial
covenants, and forecasts to continue to do so. Furthermore, the Group’s forecasts and projections, taking account of reasonably possible changes in
trading performance, show that the Group should be able to operate within the level of its current facilities.
Consequently, the Directors have a reasonable expectation that the Company and the Group have adequate resources to meet their liabilities as they fall
due for a period of at least 12 months from the date of approval of the financial statements. For this reason, they continue to adopt the going concern
basis in preparing the financial statements.
IMPAIRMENT OF GOODWILL AND OTHER INTANGIBLE ASSETS
The recoverable amount of CGUs or groups of CGUs are determined based on the higher of net realisable value and value in use calculations, which
require the use of estimates. The Group has considered the impact of the assumptions used on the calculations and has conducted sensitivity analysis
on the impairment tests of the CGUs carrying values. See notes 14 and 15 for further details.
Notes to the consolidated financial statements
CONTINUED
ar14.bakkavor.com / 53
3
CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY CONTINUED
FAIR VALUE OF DERIVATIVES AND OTHER FINANCIAL INSTRUMENTS
Derivative financial instruments and certain other financial assets are recorded at fair value in the statement of financial position. The fair value of the
financial instruments that do not have quoted market prices requires significant judgement and estimates. The Directors use their judgement in selecting
an appropriate valuation technique for these financial instruments. Valuation techniques commonly used by market practitioners are applied. For derivative
financial instruments, assumptions are made based on quoted market rates adjusted for specific features of the instrument. Other financial instruments
are valued using a discounted cash flow analysis based on assumptions supported, where possible, by observable market prices or rates.
The estimation of fair value of unlisted shares includes some assumptions not supported by observable market prices or rates. These assumptions are
based on past and expected future performance. Details of the assumptions used and of the results of sensitivity analysis regarding these assumptions
are disclosed in note 29.
PENSIONS
The Group maintains a number of defined benefit pension plans for which it has recorded a pension asset or liability. The pension asset/liability is
based on an actuarial valuation that requires a number of assumptions including discount rate, mortality rates and actual return on plan assets that may
necessitate material adjustments to this asset/liability in the future. The assumptions used by the Group are the best estimates based on historical trends
and the composition of the work force. Details of the principal actuarial assumptions used in calculating the recognised asset/liability for the defined
benefit plan are given in note 36.
RECOGNITION OF DEFERRED TAX ASSETS AND CURRENT TAX PROVISION
The recognition of deferred tax assets is based upon whether it is probable that sufficient and suitable taxable profits will be available in the future
against which the reversal of temporary differences can be deducted. Where the temporary differences relate to losses, the availability of the losses to
offset against forecast taxable profits is also considered. Recognition therefore involves judgement regarding the future financial performance of the
particular legal entity or tax group in which the deferred tax asset has been recognised. The Group had unrecognised deferred tax assets as a result of
unused tax losses of £30.1 million (2013: £34.4 million), available for offset against future profits. Deferred tax assets are not recognised on the losses
carried forward to the extent that it is not probable that the losses will be utilised.
The Group operates in various countries and its income tax returns are subject to audit and adjustment by local tax authorities. The nature of the
Group’s tax exposures is often complex and subject to change and the amounts at issue can be substantial. The Group develops an estimate of the
potential tax liability based on the tax positions taken, historical experience and its internal tax expertise. These estimates are refined as additional
information becomes known. Any outcome upon settlement that differs from a recorded provision may result in a materially higher or lower tax
expense in future periods.
4
SEGMENT INFORMATION
The chief operating decision-maker has been defined as the Management Board headed by the Chief Executive Officer. They review the Group’s internal
reporting in order to assess performance and allocate resources. Management has determined the segments based on these reports.
As at the statement of financial position date, the Group is organised as follows:
• UK:
• International:
The preparation and marketing of fresh prepared foods and fresh produce for distribution in the UK.
The preparation and marketing of fresh prepared foods and fresh produce outside of the UK.
The Group’s segment measure of profit represents operating profit before exceptional items, impairment of assets, disposals of subsidiaries and
property, plant and equipment, royalty charges and share of results of associates. Measures of total assets are provided to the Management Board;
however, cash and cash equivalents, short term deposits and some other central assets are not allocated to individual segments. Measures of segment
liabilities are not provided to the Management Board.
54 / Bakkavor Annual Report and Accounts 2014
Notes to the consolidated financial statements
CONTINUED
4
SEGMENT INFORMATION CONTINUED
The following table provides an analysis of the Group’s segment information for the period to 27 December 2014:
£ million
Revenue
Segment profit
Exceptional items (net)
Royalty charge
Impairment of assets
Profit on disposal of property, plant and equipment
Profit on disposal of subsidiary
Share of results of associates
Operating profit
Investment revenue
Finance costs
Other gains (net)
Profit before tax
Tax
Profit for the period
Other segment information:
Depreciation and amortisation
Adjusted EBITDA
Capital additions
Total assets
UK
International
Un-
allocated
1,520.1
172.5
74.5
(6.4)
(1.2)
(3.8)
1.0
–
0.2
64.3
0.7
(0.2)
–
(0.3)
–
1.8
0.8
2.8
(38.4)
112.9
42.3
(6.3)
7.0
8.8
–
–
–
–
–
–
–
–
–
–
–
–
Total
Group
1,692.6
75.2
(6.6)
(1.2)
(4.1)
1.0
1.8
1.0
67.1
0.1
(53.3)
1.7
15.6
(4.1)
11.5
(44.7)
119.9
51.1
1,089.3
123.3
25.1
1,237.7
The Group manages the performance of its businesses through the use of ‘Adjusted EBITDA’. EBITDA is generally defined as operating profit/(loss) before
share of results of associates, depreciation and amortisation. In calculating Adjusted EBITDA, we further exclude restructuring costs, royalty charges,
asset impairments and those additional charges or credits that are one-off in nature and significance.
Notes to the consolidated financial statements
CONTINUED
ar14.bakkavor.com / 55
4
SEGMENT INFORMATION CONTINUED
The following table provides an analysis of the Group’s segment information for the period to 28 December 2013:
£ million
Revenue
Segment profit/(loss) (restated)
Exceptional items
Royalty charge
Impairment of assets
Profit on disposal of subsidiaries
Share of results of associates
Operating profit/(loss)
Investment revenue
Finance costs
Other losses (net)
(Loss)/profit before tax
Tax (restated)
Profit/(loss) for the period
Other segment information:
Depreciation and amortisation
Adjusted EBITDA (restated)
Capital additions
Total assets
UK
International
Un-
allocated
Total Discontinued
operations
Group
Continuing
operations
1,463.6
64.3
(0.1)
(1.2)
–
–
0.3
63.3
211.8
(0.6)
(1.6)
–
(21.7)
17.3
0.9
(5.7)
(39.8)
104.1
31.1
(7.1)
6.5
5.4
–
–
–
–
–
–
–
–
–
–
–
1,675.4
63.7
(1.7)
(1.2)
(21.7)
17.3
1.2
57.6
0.1
(59.0)
(1.8)
(3.1)
9.4
6.3
(46.9)
110.6
36.5
1,071.1
122.8
46.0
1,239.9
25.6
0.9
–
–
–
15.5
–
16.4
–
–
–
16.4
3.0
19.4
–
0.9
0.4
–
1,649.8
62.8
(1.7)
(1.2)
(21.7)
1.8
1.2
41.2
0.1
(59.0)
(1.8)
(19.5)
6.4
(13.1)
(46.9)
109.7
36.1
1,239.9
Discontinued operations relate to the Group’s International segment.
MAJOR CUSTOMERS
In 2014 the Group’s four largest customers accounted for 76% (2013: 75%) of our total revenue from continuing operations, with no single customer
representing more than 30% (2013: 30%) of our global revenue from continuing operations. The Group does not enter into long-term contracts with its
retail customers.
5
REVENUE
£ million
Continuing operations
Sale of goods
Investment revenue
Discontinued operations
Sale of goods
2014
2013
1,692.6
1,649.8
0.1
0.1
1,692.7
1,649.9
–
25.6
56 / Bakkavor Annual Report and Accounts 2014
Notes to the consolidated financial statements
CONTINUED
6
PROFIT/(LOSS) FOR THE PERIOD
Profit/(loss) for the period has been arrived at after charging/(crediting):
£ million
Depreciation of property, plant and equipment – owned
– leased
Research and development costs
Cost of inventory recognised as an expense
Write down of inventories recognised as an expense
Amortisation of intangible assets
Impairment of assets (note 8)
Exceptional items (note 7)
Profit on disposal of property, plant and equipment
Profit on disposal of subsidiary (note 32)
Staff costs (note 9)
The analysis of auditor remuneration is as follows:
£’000
Fees payable to the Company’s auditor for the audit of the Company’s annual accounts
The audit of the Company’s subsidiaries pursuant to legislation
Total audit fees
Tax services
Fees payable to the Company’s auditor and their associates for other services to the Group
Total non-audit fees
2014
35.6
0.4
7.9
830.5
0.1
8.7
4.1
6.6
(1.0)
(1.8)
401.2
Restated
2013
37.9
0.3
7.9
831.4
2.9
8.7
21.7
1.7
–
(1.8)
393.9
2014
2013
73
299
372
340
86
426
73
322
395
265
283
548
Of the prior period total non-audit fees, £245,400 relates to the refinancing that was completed in June 2013 and has been offset against the financing
raised and amortised over the period of the financial instrument.
7
EXCEPTIONAL ITEMS (NET)
Exceptional items are those that, in management’s judgement, should be disclosed by virtue of their nature or amount. Exceptional items are as follows:
£ million
Restructuring costs
Temporary site closure and insurance recovery
RESTRUCTURING COSTS
2014
2013
(6.6)
–
(6.6)
(2.5)
0.8
(1.7)
The restructuring of our UK businesses, which we announced early in 2014, provides greater alignment in our approach to our categories and customers.
The benefits of the reorganisation are already being seen through greater efficiencies and a strong pipeline of new product launches. As a consequence
of this restructure and other reorganisation initiatives, the Group has recognised exceptional charges of £6.6 million in 2014 (2013: £2.5 million), principally
arising from redundancy payments.
TEMPORARY SITE CLOSURE AND INSURANCE RECOVERY
In March 2013, the Group agreed settlement of an outstanding insurance claim of £0.8 million.
The allocation of exceptional items by segment is shown in note 4.
Notes to the consolidated financial statements
CONTINUED
8
IMPAIRMENT OF ASSETS
£ million
Impairment of goodwill
Impairment of intangible assets
Impairment of property, plant and equipment
ar14.bakkavor.com / 57
2014
2013
2.6
0.1
1.4
4.1
21.2
–
0.5
21.7
The annual impairment review of the carrying value of goodwill and intangible assets has resulted in a goodwill impairment charge of £2.6 million
(2013: £21.2 million within the International segment) and an intangible asset impairment charge of £0.1 million (2013: £nil) all of which relate to the
UK segment.
During the period, the Group impaired £1.4 million of property, plant and equipment. £1.1 million (2013: £nil) being impaired within the UK segment and
£0.3 million (2013: £0.5 million) within the International segment.
9
STAFF COSTS
The average monthly number of employees (including executive Directors) during the year was:
Production
Management and administration
Sales and distribution
Their aggregate remuneration comprised:
£ million
Wages and salaries
Social security and other costs
Other pension costs (note 36)
The Directors’ emoluments were as follows:
£’000
Directors’ emoluments excluding pension contributions
Directors’ pension contributions
2014
Number
2013
Number
15,685
1,535
802
18,022
2014
355.3
38.8
7.1
401.2
16,506
1,595
791
18,892
Restated
2013
350.9
36.8
6.2
393.9
2014
2013
876
79
955
908
88
996
The aggregate emoluments of the highest paid Director were £565,474 (2013: £606,155). The pension contributions of the highest paid Director at
27 December 2014 were £41,805 (2013: £51,800).
10
INVESTMENT REVENUE
£ million
Interest on bank deposits
2014
0.1
2013
0.1
58 / Bakkavor Annual Report and Accounts 2014
Notes to the consolidated financial statements
CONTINUED
11
FINANCE COSTS
£ million
Interest on borrowings
Interest on obligations under finance leases
Amortisation of refinancing costs
Unwinding of discount on provisions (note 28)
12
OTHER GAINS AND LOSSES
£ million
Change in the fair value of derivative financial instruments
Foreign exchange gains/(losses)
13
TAX
£ million
Continuing operations
Current tax:
Current period
Prior period adjustment
Deferred tax:
Current period (note 25)
Prior period adjustment (note 25)
Tax charge/(credit) for the period
2014
48.8
0.2
4.0
0.3
53.3
2013
48.2
0.2
9.4
1.2
59.0
2014
2013
1.3
0.4
1.7
(1.0)
(0.8)
(1.8)
2014
Restated
2013
4.9
(2.6)
0.4
1.4
4.1
0.7
(1.9)
(0.9)
(4.3)
(6.4)
Corporation tax is calculated at 21.5% (2013: 23.25%) of the estimated assessable profit/(loss) for the period. Taxation for other jurisdictions is calculated
at the rates prevailing in the respective jurisdictions.
The charge/(credit) for the period can be reconciled to the profit/(loss) per the income statement as follows:
2014
£ million
2014
%
Restated
2013
£ million
Restated
2013
%
Profit/(loss) before tax:
15.6
100.0
(19.5)
(100.0)
Tax at the blended UK corporation tax rate of 21.5% (2013: 23.25%)
Non-deductible expenses
Adjustment in respect of prior periods
R&D tax credits
Tax effect of losses carried forward not recognised
Unprovided deferred tax assets now recognised
Overseas taxes at different rates
Release of deferred tax on IBA reversal
Deferred tax change in rate
Group relief surrendered to Bakkavor Group Limited free of charge
Tax charge/(credit) and effective tax rate for the period
3.4
1.2
(1.2)
–
1.3
(0.7)
0.8
(0.9)
(0.1)
0.3
4.1
21.5
7.7
(7.7)
–
8.4
(4.4)
5.1
(5.7)
(0.6)
1.9
26.2
(4.5)
4.4
(6.2)
(0.1)
2.7
–
0.5
(1.0)
(2.2)
–
(6.4)
(23.3)
22.6
(31.7)
(0.5)
13.8
–
2.6
(5.1)
(11.2)
–
(32.8)
In addition to the amount charged/credited to the income statement, a £nil charge (2013: £2.6m credit) relating to tax has been recognised directly in
other comprehensive income. No other tax charges/credits have been recognised directly in equity.
The UK corporation tax rate reduced from 23% to 21% from 1 April 2014 and will reduce to 20% with effect from 1 April 2015.
Notes to the consolidated financial statements
ar14.bakkavor.com / 59
CONTINUED
14
GOODWILL
£ million
Cost
At 30 December 2012
Disposal of subsidiaries
Exchange differences
At 28 December 2013
Exchange differences
At 27 December 2014
Accumulated impairment losses
At 30 December 2012
Disposal of subsidiaries
Impairment
Exchange differences
At 28 December 2013
Impairment
Exchange differences
At 27 December 2014
Carrying amount
At 27 December 2014
At 28 December 2013
735.9
(23.1)
(0.2)
712.6
(0.4)
712.2
(70.5)
23.1
(21.2)
0.4
(68.2)
(2.6)
0.7
(70.1)
642.1
644.4
Goodwill acquired in a business combination is allocated, at acquisition, to the CGUs or groups of CGUs that are expected to benefit from that business
combination. A summary of the allocation of the carrying value of goodwill by segment is as follows:
£ million
UK
International
The recoverable amounts of the CGUs or groups of CGUs are determined based on value in use calculations.
The following impairments have been recognised within the Group’s two reporting segments during the periods presented:
£ million
Continuing operations
UK
International
27 December 28 December
2013
2014
601.5
40.6
642.1
604.1
40.3
644.4
2014
2013
2.6
–
–
21.2
The 2014 impairment within the Group’s UK segment has arisen due to more difficult trading conditions across two of the businesses. The 2013
International segment impairment was a result of adverse trading conditions.
60 / Bakkavor Annual Report and Accounts 2014
Notes to the consolidated financial statements
CONTINUED
14
GOODWILL CONTINUED
The key assumptions used in the impairment reviews were as follows:
• Discount rates: Management uses post-tax rates that reflect current market assessments of the time value of money and the risks specific to the CGUs.
The present value of the future cash flows is calculated using a pre-tax discount rate that ranges from 8.4% to 10.4% (2013: 8.1% to 10.3%).
• Growth rates. The revenue growth rates are based on industry growth forecasts. Changes in selling prices and direct costs are based on past practices
and expectations of future changes in the market. The Group this year has prepared cash flow forecasts derived from the most recent financial budgets
approved by management for the next three years determined by business units, and extrapolated cash flows for the following two years based on an
estimated growth rate, to provide a five year forecast. Cash flows are then extrapolated using a perpetuity growth rate of 2 per cent (2013: 2 per cent).
The forecast cash flow of CGUs in those territories with growth rates below 2% perpetuity have been adjusted to reflect this.
The Group has conducted a sensitivity analysis on the impairment test of each CGUs carrying value. The assumptions used, and the impact of
sensitivities on these assumptions, are shown below:
£ million
Sensitivity:
Head room of impairment test based on management assumptions
UK
International
241.7
53.5
If the pre-tax discount rate were to be increased by a factor of 5%, the increase in the impairment charge would be £2.8 million and for an increase of
10% the additional impairment charge would be £6.3 million. A 10% reduction in the perpetuity growth rate would result in a further impairment charge
of £1.1 million. Furthermore, management continually review the commercial returns across the Group’s product portfolio, and, as in the past, if such
returns deteriorate then management may choose to exit from low margin business.
15
OTHER INTANGIBLE ASSETS
£ million
Cost
At 30 December 2012
Disposal of subsidiaries
Exchange differences
At 28 December 2013
Exchange differences
At 27 December 2014
Amortisation and impairment
At 30 December 2012
Disposal of subsidiaries
Charge for the period
At 28 December 2013
Impairment
Charge for the period
Exchange differences
At 27 December 2014
Carrying amount
At 27 December 2014
At 28 December 2013
Customer
Relationships
Customer
Contracts
92.4
(2.7)
0.1
89.8
(0.2)
89.6
(65.8)
2.7
(8.6)
(71.7)
–
(8.6)
0.1
(80.2)
9.4
18.1
1.6
–
–
1.6
–
1.6
(1.3)
–
(0.1)
(1.4)
(0.1)
(0.1)
–
(1.6)
–
0.2
Total
94.0
(2.7)
0.1
91.4
(0.2)
91.2
(67.1)
2.7
(8.7)
(73.1)
(0.1)
(8.7)
0.1
(81.8)
9.4
18.3
The intangibles impairment charge of £0.1 million (2013: £nil) all relates to the UK segment. The impairment has a risen due to difficult trading conditions
in one particular business.
Notes to the consolidated financial statements
CONTINUED
ar14.bakkavor.com / 61
PROPERTY, PLANT AND EQUIPMENT
16
£ million
Cost
At 30 December 2012
Additions
Disposals
Disposal of subsidiary
Reclassification
Transfer to assets held for sale
Exchange differences
At 28 December 2013
Additions
Disposals
Reclassifications
Exchange differences
At 27 December 2014
Accumulated depreciation and impairment
At 30 December 2012
Charge for the period
Disposals
Disposal of subsidiary
Impairment of assets
Reclassification
Transfer to assets held for sale
Exchange differences
At 28 December 2013
Charge for the period
Disposals
Impairment of assets
Reclassifications
Exchange differences
At 27 December 2014
Carrying amount
At 27 December 2014
At 28 December 2013
Land
and
buildings
Plant
and
machinery
Fixtures
and
equipment
185.0
1.6
(0.1)
(1.1)
(2.0)
(0.7)
1.1
183.8
7.2
(0.8)
(1.0)
–
280.5
31.1
(1.7)
(1.1)
1.9
(1.8)
(0.4)
308.5
38.1
(0.7)
0.8
(0.8)
189.2
345.9
(85.2)
(6.7)
–
0.4
(0.2)
–
0.6
0.2
(90.9)
(6.5)
0.4
(0.3)
(0.1)
–
(134.3)
(24.9)
1.4
1.0
(0.3)
(0.9)
1.3
0.4
(156.3)
(22.9)
0.6
(1.1)
–
0.7
49.7
3.4
(1.7)
(0.5)
1.0
(0.2)
–
51.7
5.8
(0.5)
0.2
0.1
57.3
(27.8)
(6.6)
1.6
0.4
–
–
0.2
0.1
(32.1)
(6.6)
0.4
–
0.1
–
Total
515.2
36.1
(3.5)
(2.7)
0.9
(2.7)
0.7
544.0
51.1
(2.0)
–
(0.7)
592.4
(247.3)
(38.2)
3.0
1.8
(0.5)
(0.9)
2.1
0.7
(279.3)
(36.0)
1.4
(1.4)
–
0.7
(97.4)
(179.0)
(38.2)
(314.6)
91.8
92.9
166.9
152.2
19.1
19.6
277.8
264.7
The carrying value of the Group’s plant and machinery includes an amount of £2.3 million (2013: £2.7 million) in respect of assets held under finance leases.
At 27 December 2014, the Group had entered into contractual commitments for the acquisition of property, plant and equipment amounting to
£2.1 million (2013: £4.9 million).
During the period, the Group impaired property, plant and equipment by £1.4 million. £1.1 million (2013: £nil) within the UK sector and £0.3 million
(2013: £0.5 million) within the International sector.
62 / Bakkavor Annual Report and Accounts 2014
Notes to the consolidated financial statements
CONTINUED
SUBSIDIARIES
The Group consists of a parent company, Bakkavor Finance (2) plc, incorporated in the UK and a number of subsidiaries and associates held directly and
indirectly by Bakkavor Finance (2) plc. Note 9 to the Company’s separate financial statements lists details of the material interests in subsidiaries.
The table below shows details of non-wholly owned subsidiaries of the Group that have material non-controlling interests:
£ million
Name of subsidiary
Italpizza Srl
Place of
registration and
operation
Proportion of
non-controlling
voting interests
2014
Profit allocated
to non-controlling
interests
2014
Accumulated
non-controlling
interests
2014
Italy
40%
0.7
8.8
During 2014, the Group disposed of 40% of its interest in Italpizza Srl, which was accounted for as an equity transaction, as the Group retains control of
the operations. Notes 31 and 32 provide summarised financial information relating to the subsidiary, a reconciliation of non-controlling interest and the
disposal of investment. There are no significant restrictions on the ability of the Group to access or use assets and settle liabilities of the subsidiary.
ASSOCIATES
Details of the principal associated undertakings of the Group at 27 December 2014 were as follows:
17
18
Name of associate
Manor Fresh Limited
La Rose Noire Limited
£ million
Associates that are not individually material
At 30 December 2012
Share of profit after tax
Exchange differences
Dividend payment
At 28 December 2013
Share of profit after tax
Exchange differences
Dividend payment
At 27 December 2014
OTHER INVESTMENTS
19
£ million
At 28 December 2013 and 27 December 2014
20
INVENTORIES
£ million
Raw materials and packaging
Work-in-progress
Finished goods
Place of registration
and operation
Proportion of voting interest
Principal activity
2014
2013
Method of
accounting
United Kingdom
Supply of Produce
Hong Kong
Producer of bakery and pastry products
27.5%
45.0%
27.5%
45.0%
Equity
Equity
Manor
Fresh
Limited
La Rose
Noire
Limited
0.6
0.3
–
(0.1)
0.8
0.2
–
(0.1)
0.9
9.4
0.9
(0.6)
(0.5)
9.2
0.8
0.5
(0.5)
10.0
Total
10.0
1.2
(0.6)
(0.6)
10.0
1.0
0.5
(0.6)
10.9
Non listed
investments
held at cost
0.1
27 December 28 December
2013
2014
51.9
2.4
10.0
64.3
46.1
2.6
9.8
58.5
Notes to the consolidated financial statements
CONTINUED
21
TRADE AND OTHER RECEIVABLES
£ million
Amounts receivable from trade customers
Allowance for doubtful debts
Net amounts receivable from trade customers
Other receivables
Prepayments
ar14.bakkavor.com / 63
27 December 28 December
2013
2014
168.2
(1.0)
167.2
14.6
19.5
201.3
159.5
(0.8)
158.7
12.9
17.4
189.0
The Group has a £65 million (2013: £80 million) Receivables Securitisation Facility which it can draw against, up to a maximum of 72% of its net eligible
receivables balance. As at 27 December 2014 the Group had not drawn against this facility (2013: £25 million). The arrangement is with recourse and so
the Group continues to recognise these receivables until payment is received from the customer.
The average credit period taken on sales of goods is 33 days (2013 – 32 days). An allowance has been made for estimated irrecoverable amounts from
the sale of goods of £1.0 million (2013: £0.8 million). Allowances against receivables are made on a specific basis based on objective evidence and
previous default experience. Receivables are therefore deemed past due but not impaired when the contractual obligation to pay has been exceeded,
but as yet no objective evidence or previous default experience indicates this debt will be irrecoverable.
The Directors consider that the carrying amount of trade and other receivables from customers approximates to their fair value due to their short-term
nature. The following table is an ageing analysis of trade receivables from customers:
£ million
Not past due
Past due by 1 – 30 days
Past due by 31 – 60 days
Past due by 61 – 90 days
Past due by more than 90 days
27 December 28 December
2013
2014
152.1
13.8
1.3
0.2
0.8
149.3
7.0
1.5
0.8
0.9
168.2
159.5
Trade receivables renegotiated in 2014 that would otherwise have been past due or impaired amounted to £nil (2013: £nil).
The majority of the Group’s customers are all leading UK retailers, representing more than 76% (2013: 75%) of the Group’s revenue and therefore hold
favourable credit ratings. On this basis the Group does not see any need to charge interest, seek collateral or credit enhancements to secure any of its
trade receivables due to their short term nature.
The following table is an analysis of the movement of the Group’s trade receivables allowance for doubtful debts:
£ million
Balance at beginning of the period
Allowances recognised against receivables
Amounts written off as uncollectible during the period
Amounts recovered during the period
Allowance reversed
Balance at end of the period
22
CASH AND CASH EQUIVALENTS
£ million
Cash and cash equivalents
27 December 28 December
2013
2014
(0.8)
(0.8)
0.1
0.4
0.1
(1.0)
(0.8)
(1.2)
0.7
0.3
0.2
(0.8)
27 December 28 December
2013
2014
24.6
45.0
Cash and cash equivalents comprise cash held by the Group and short-term bank deposits with an original maturity of three months or less which are
readily convertible to a known amount of cash and are subject to an insignificant risk of change in value.
The carrying amount of these assets approximates their fair value.
64 / Bakkavor Annual Report and Accounts 2014
Notes to the consolidated financial statements
CONTINUED
23
BORROWINGS
BAKKAVOR FINANCE (2) PLC SENIOR SECURED NOTES
8.25% SENIOR SECURED NOTES
The Group has £332 million (2013: £332 million) of 8.25% Senior Secured Notes due in 2018. Interest on the Notes is payable semi-annually each year
on 15 February and 15 August. The Notes will mature on 15 February 2018.
8.75% SENIOR SECURED NOTES
The Group has £150 million (2013: £150 million) of 8.75% Senior Secured Notes due in 2020. Interest on the Notes is payable semi-annually each year
on 15 June and 15 December. The Notes will mature on 15 June 2020.
BAKKAVOR CENTRAL FINANCE LIMITED RECEIVABLES SECURITISATION FACILITY
The Group has a £65 million (2013: £80 million) Receivables Securitisation Facility maturing in June 2016, with the option of a one year extension to
2017. The maximum drawing of the receivable facility depends on the size of the Group’s UK receivable book and the Group’s ability to deliver against
performance triggers. The Group can draw a maximum of 72% of net eligible receivables. Net eligible receivables, in its simplest form, is the Group’s UK
receivables aged no greater than 60 days less accruals for customer deductions.
The maximum drawdown period under this facility is one month provided that the amount drawn is less than 72% of net eligible receivables at any
reporting date. The interest rate incurred by the Group for amounts drawn against the receivables facility is Libor plus a margin of 2.6% (2013: Libor plus
a margin of 2.6%). As at 27 December 2014, the Group has not drawn against the facility (2013: £25.0 million). Where the facility is undrawn the interest
rate is a fixed 1.3% (2013: 1.3%) being the non-utilisation fee.
BAKKAVOR FINANCE (2) PLC BANK FACILITIES
The Group’s £130 million bank facilities mature on 1 October 2016 and comprised a £60 million term loan and £70 million RCF (including an overdraft
facility of £1515 million and further ancilliary facilities of £12.44 million). The Group has repaid £50 million (2013: £5.8 million) of the term loan as at
27 December 2014 and therefore the balance owing at that date was £10 million (2013: £54.2 million). At 27 December 2014 there were no drawings
under the RCF and overdraft facilities (2013: £nil).
The remaining term loan amount of £10 million and any RCF balance outstanding is to be repaid on 1 October 2016. The interest rate on the term loan
at 27 December 2014 was a variable rate of 4.56% (2013: 5.34%), which represents LIBOR plus a margin of 4.00%.
The Senior Secured Notes and bank facilities are secured by fixed and floating charges over the assets of Bakkavor Finance (2) plc and its subsidiaries as
governed by the Inter-creditor Agreement. The receivables securitisation is secured by floating charges over the assets of Bakkavor Central Finance Limited.
£ million
Bank overdrafts
Bank loans
Receivables securitisation
8.25% Senior Secured Notes
8.75% Senior Secured Notes
Borrowings repayable as follows:
On demand or within one year
In the second year
In the third to fifth years inclusive
Over five years
Analysed as:
Amount due for settlement within 12 months
(shown within current liabilities)
Amount due for settlement after 12 months
27 December 28 December
2013
2014
1.3
11.4
(0.4)
337.0
144.9
494.2
8.8
8.7
328.6
148.1
494.2
8.8
485.4
494.2
3.6
55.1
24.3
335.3
143.9
562.2
43.2
11.9
360.0
147.1
562.2
43.2
519.0
562.2
The Group has not drawn against the receivables facility as at 27 December 2014 and as such the £(0.4) million receivables securitisation credit
represents unamortised fees. In 2013, the Group had drawn £25.0 million against the facility and unamortised fees were £(0.7) million.
Notes to the consolidated financial statements
CONTINUED
23
BORROWINGS CONTINUED
The following table is an analysis of the Group’s borrowings by currency:
£ million
Borrowings by currency
GBP
Euro
RMB
The weighted average interest rates paid were as follows:
Bank overdrafts
Senior Secured Notes and bank loans
ar14.bakkavor.com / 65
27 December 28 December
2013
2014
489.5
555.4
4.5
0.2
5.8
1.0
494.2
562.2
27 December 28 December
2013
%
2014
%
2.08
8.29
1.70
7.71
The Group has a £63.2 million (2013: £63.2 million) interest rate swap in place at 27 December 2014, which matures in September 2016. Both the 8.25%
and 8.75% Senior Secured Notes due in 2018 and 2020 respectively, were issued at a fixed rate. The Group’s term loan, receivables securitisation and
other borrowings are arranged at floating rates, thus exposing the Group to cash flow interest rate risk.
The Directors estimate the fair value of the Group’s borrowings are not materially different from their book value due to the current rates available to the
Group being in line with the rates agreed over the facilities and the relative costs of renegotiation of the debt as compared to the capital value.
£ million
Analysis of net debt
Cash and cash equivalents
Borrowings
Unamortised fees
Interest accrual
Finance leases
Debt due within one year
Borrowings
Unamortised fees
Finance leases
Debt due after one year
Group statutory net debt
Group statutory net debt
Unamortised fees
Interest accrual
Cash included in assets held for sale
Group operational net debt
27 December 28 December
2013
2014
24.6
(1.9)
3.9
(10.8)
(0.4)
(9.2)
45.0
(35.4)
3.9
(11.7)
(0.4)
(43.6)
(493.3)
(530.8)
7.9
(1.7)
(487.1)
(471.7)
(471.7)
(11.8)
10.8
–
11.8
(2.2)
(521.2)
(519.8)
(519.8)
(15.7)
11.7
2.5
(472.7)
(521.3)
66 / Bakkavor Annual Report and Accounts 2014
Notes to the consolidated financial statements
CONTINUED
24
25
DERIVATIVE FINANCIAL INSTRUMENTS
Held for trading derivatives that are not designated in hedge accounting relationships:
£ million
Foreign currency contracts – included in current assets
Foreign currency contracts
Interest rate contracts
Included in current liabilities
Total
Further details of derivative financial instruments are provided in note 29.
27 December 28 December
2013
2014
0.5
(2.4)
(4.5)
(6.9)
(6.4)
0.3
(1.6)
(6.4)
(8.0)
(7.7)
DEFERRED TAX
The following are the major deferred tax liabilities and assets recognised by the Group and movements thereon during the current and prior
reporting period.
£ million
At 30 December 2012
(Credit)/charge to income
Credit to equity
At 28 December 2013
Charge/(credit) to income
At 27 December 2014
Accelerated
tax
depreciation
Fair value
gains
Intangibles
Provisions
Impairment
losses
Restated
Retirement
benefit
obligations
19.6
(5.8)
–
13.8
2.6
16.4
(2.1)
0.6
–
(1.5)
0.2
(1.3)
6.2
(2.5)
–
3.7
(1.8)
1.9
(1.7)
1.2
–
(0.5)
–
(0.5)
(1.4)
0.5
–
(0.9)
–
(0.9)
2.3
0.8
(2.6)
0.5
0.8
1.3
Total
22.9
(5.2)
(2.6)
15.1
1.8
16.9
Certain deferred tax assets and liabilities have been offset and the net liability is shown as deferred tax liabilities in the statement of financial position.
At the statement of financial position date, the Group had unused tax losses of £30.1 million (2013: £34.4 million) available for offset against future
profits. Deferred tax assets are not recognised on the losses carried forward to the extent that it is not probable that the losses will be utilised.
The Group is not aware of any temporary differences associated with undistributed earnings of subsidiaries due to the availability of tax credits against
such liabilities. The Group is in a position to control the timing of the reversal of any such temporary differences should they arise.
Temporary differences arising in connection with interests in associates are insignificant.
Notes to the consolidated financial statements
CONTINUED
ar14.bakkavor.com / 67
OBLIGATIONS UNDER FINANCE LEASES
26
£ million
Amounts payable under finance leases:
Within one year
In the second to fifth years inclusive
Over five years
Less: future finance charges
Present value of lease obligations
Analysed as:
Amount due for settlement within 12 months (shown within current liabilities)
Amount due for settlement after 12 months
Minimum
lease payments
Present value of
minimum lease payments
27 December 28 December 27 December 28 December
2013
2014
2014
2013
0.5
1.8
0.3
2.6
(0.5)
2.1
0.6
1.9
0.8
3.3
(0.7)
2.6
0.4
1.4
0.3
2.1
2.1
0.4
1.7
2.1
0.4
1.5
0.7
2.6
2.6
0.4
2.2
2.6
The weighted average lease term outstanding is 5.5 years (2013: 6.3 years). For the 52 weeks ended 27 December 2014, the weighted average effective
borrowing rate was 7.69% (2013: 7.36%). Interest rates are fixed at the contract date. All leases are on a fixed repayment basis and no arrangements have
been entered into for contingent rental payments.
The finance lease obligations are denominated in Sterling and the fair value of the Group’s lease obligations approximates their carrying amount.
The Group’s obligations under finance leases are secured by the lessors’ rights over the leased assets.
27
TRADE AND OTHER PAYABLES
£ million
Trade payables
Social security and other taxation
Amounts owed to ultimate parent company
Other payables
Accruals
Less: amounts due after one year
Other payables
Trade and other payables due within one year
27 December 28 December
2013
2014
211.1
2.0
2.4
39.9
108.9
364.3
(0.2)
364.1
203.6
2.1
1.2
28.7
80.0
315.6
(0.1)
315.5
Trade payables and accruals principally comprise amounts outstanding for trade purchases and ongoing costs. The average credit period taken for trade
purchases is 61 days (2013 – 66 days). No interest is incurred against trade payables.
The Directors consider that the carrying amount of trade payables approximates to their fair value.
68 / Bakkavor Annual Report and Accounts 2014
Notes to the consolidated financial statements
CONTINUED
28
PROVISIONS
£ million
At 30 December 2012
Increase of provision
Release of provision
Utilisation of provision
Unwinding of discount
At 28 December 2013
Included in current liabilities
Included in non-current liabilities
At 28 December 2013
Utilisation of provision
Unwinding of discount
At 27 December 2014
Included in current liabilities
Included in non-current liabilities
Onerous Dilapidation
provisions
leases
4.5
–
(2.5)
(0.6)
0.3
1.7
0.5
1.2
1.7
(0.2)
–
1.5
0.6
0.9
7.3
2.1
–
–
0.9
10.3
–
10.3
10.3
–
0.3
10.6
–
10.6
Total
11.8
2.1
(2.5)
(0.6)
1.2
12.0
0.5
11.5
12.0
(0.2)
0.3
12.1
0.6
11.5
Onerous lease provisions will be utilised over the term of the individual leases to which they relate.
Provision releases of £2.5 million in the prior year relate entirely to onerous leases and follow changes to circumstances in the sub-letting of properties.
Releases are recognised through administrative expenses, which is where the original charge was recognised.
Dilapidation provisions relate to obligations under various property leases to ensure that, at the end of the leases, the buildings are in the condition
agreed with the landlords. The provisions will be utilised at the end of the individual lease terms to which they relate.
29
FINANCIAL INSTRUMENTS
CAPITAL RISK MANAGEMENT
The Group manages its capital to ensure that entities in the Group will be able to continue as a going concern while maximising the return to
stakeholders through the optimisation of the debt and equity balance. The capital structure of the Group consists of borrowings, as disclosed in note 23,
cash and cash equivalents and equity attributable to owners of the parent, comprising issued capital, reserves and retained earnings.
The Group manages its capital by collating timely and reliable information to produce various internal reports such as capital expenditure and weekly
net debt reports, which enable the Board of Directors to assess the Group’s capital, and manage that capital effectively and in line with the Group’s
objectives. The gearing of the Group is constantly monitored and managed to ensure that the ratio between debt and equity is at an acceptable level and
enables the Group to operate as a going concern and maximise stakeholders return.
GEARING RATIO
The gearing ratio at the period end was as follows:
£ million
Debt
Cash and cash equivalents
Net debt
Equity
Net debt to net debt plus equity
Debt is defined as long and short term borrowings, as disclosed in note 23 and finance leases payable in note 26.
27 December 28 December
2013
2014
496.3
(24.6)
471.7
322.9
564.8
(45.0)
519.8
301.5
59.4%
63.3%
Notes to the consolidated financial statements
CONTINUED
ar14.bakkavor.com / 69
29
FINANCIAL INSTRUMENTS CONTINUED
SIGNIFICANT ACCOUNTING POLICIES
Details of the significant accounting policies and methods adopted, including the criteria for recognition, the basis of measurement and the basis on
which income and expenses are recognised, in respect of each class of financial asset, financial liability and equity instrument are disclosed in note 2.
CATEGORIES OF FINANCIAL INSTRUMENTS
£ million
Financial assets
Fair value through profit and loss:
Derivative financial instruments
Loans and receivables at amortised cost:
Trade receivables
Other receivables
Cash and cash equivalents
£ million
Financial liabilities
Fair value through profit and loss:
Derivative financial instruments
Other financial liabilities at amortised cost:
Trade payables
Amounts owed to ultimate parent company
Other payables
Borrowings
Finance leases
27 December 28 December
2013
2014
0.5
0.3
167.2
14.6
24.6
206.9
158.7
12.9
45.0
216.9
27 December 28 December
2013
2014
6.9
8.0
211.1
2.4
39.9
494.2
2.1
756.6
203.6
1.2
28.7
562.2
2.6
806.3
The fair value of the financial assets approximates to their carrying value due to the short term nature of the receivables. Fair values have been
determined as level 2 under IFRS 7 ‘Financial Instruments: Disclosures’.
The fair value of other financial liabilities at amortised cost approximates to their carrying value. The trade and other payables approximate to their fair
value due to the short term nature of the payables. The finance lease fair value approximates to the carrying value based on discounted future cash flows.
FINANCIAL RISK MANAGEMENT
The Group is exposed to a number of financial risks such as access to and cost of funding, interest rate exposure, currency exposure and working capital
management. The Group seeks to minimise these risks where possible and does this by constantly monitoring and reviewing the best use of derivative
financial instruments. Use of financial instruments is governed by Group policies which are approved by the Board. The treasury function does not
operate as a profit centre, makes no speculative transactions and only enters into or trades financial instruments to manage specific exposures.
MARKET RISK
The Group’s activities expose it primarily to the financial risks of changes in foreign currency exchange rates and interest rates. The Group enters into a
variety of derivative financial instruments to manage its exposure to interest rate and foreign currency risk, including:
• Forward foreign exchange contracts to hedge the exchange rate risk arising on revenues and purchases in foreign currencies.
• Interest rate swaps to mitigate the risk of rising interest rates.
Market risk exposures are supplemented by sensitivity analysis. There has been no change to the Group’s exposure to market risks or the manner in
which it manages and measures the risk.
70 / Bakkavor Annual Report and Accounts 2014
Notes to the consolidated financial statements
CONTINUED
29
FINANCIAL INSTRUMENTS CONTINUED
FOREIGN CURRENCY RISK MANAGEMENT
Foreign currency risk management occurs at a transactional level on revenues and purchases in foreign currencies and at a translational level in relation to
the translation of overseas operations. All transactional risks, cash flow forecasts and related hedges are reviewed by the Group Hedging Committee and
Group Treasury, at least quarterly, to monitor foreign exchange rates and confirm the appropriateness of the Group’s hedged cover.
The Group’s main foreign exchange risk is to the Euro and US dollar.
During the 52 week period to 27 December 2014, the Euro weakened against Sterling by 6.8%, with the closing rate at €1.2787 compared to €1.1972 at
the prior period end. The average rate for the 52 week period to 27 December 2014 was €1.2413, a weakening of the Euro of 5.4% versus prior year.
In the same period the US dollar, strengthened against Sterling by 5.7%, with the closing rate at $1.5562 compared to $1.6494 at the prior period end.
The average rate for the period to 27 December 2014 was $1.6478, a 5.3% weakening of the US dollar versus the prior year.
The net foreign exchange impact on profit from transactions is a gain of £0.4 million (2013: loss of £0.8 million).
FOREIGN CURRENCY SENSITIVITY ANALYSIS
A sensitivity analysis has been performed on the financial assets and liabilities to a sensitivity of 10% increase/decrease in the exchange rates. A 10%
increase/decrease has been used, and represents management’s assessment of the reasonably possible change in foreign exchange rates. The sensitivity
analysis includes only outstanding foreign currency denominated monetary items and adjusts their translation at the period end for a 10% change in foreign
currency rates. The sensitivity analysis includes external loans as well as loans to foreign operations within the Group where the denomination of the loan
is in a currency other than the currency of the lender or the borrower. A positive number below indicates an increase in profit where Sterling strengthens
10% against the relevant currency.
Profit or (loss)
10% Strengthening
Profit or (loss)
10% Weakening
£ million
Euro
USD
HKD
RMB
27 December 28 December 27 December 28 December
2013
2014
2014
2013
(5.5)
(2.3)
0.3
0.2
(4.6)
(1.2)
0.3
–
6.8
2.8
0.2
(0.3)
5.6
1.5
0.1
–
FOREIGN EXCHANGE CONTRACTS
It is the policy of the Group to enter into foreign exchange contracts to cover specific foreign currency payments and receipts. The Group also enters into
foreign exchange contracts to manage the risk associated with anticipated sales and purchase transactions to minimise the exposure generated.
The following table details Sterling foreign currency contracts outstanding as at 27 December 2014:
Outstanding contracts
2014
2013
2014
2013
2014
2013
2014
2013
Average
exchange
rate
Foreign
currency
(million)
Contract
value
(£ million)
Fair
value
(£ million)
Net Euros:
3 months less
3 to 6 months
6 to 12 months
Over 12 months
Net US Dollars:
3 months less
3 to 6 months
6 to 12 months
Over 12 months
1.24
1.23
1.24
1.25
1.58
1.67
1.60
1.57
1.19
1.19
1.21
1.20
1.56
1.57
1.59
–
38.5
27.5
25.3
2.0
30.4
2.5
2.4
0.1
32.9
33.5
24.3
(5.1)
5.2
2.8
3.6
–
31.1
22.4
20.4
1.6
19.2
1.5
1.5
–
97.7
27.6
28.1
20.1
(4.2)
3.3
1.8
2.3
–
79.0
(1.2)
(0.6)
(0.4)
–
0.3
0.1
0.1
–
(1.7)
(0.4)
(0.5)
(0.3)
(0.1)
(0.1)
(0.1)
(0.1)
–
(1.6)
Notes to the consolidated financial statements
CONTINUED
ar14.bakkavor.com / 71
29
FINANCIAL INSTRUMENTS CONTINUED
FOREIGN EXCHANGE CONTRACTS CONTINUED
The following table details the Euro foreign currency contracts outstanding as at 27 December 2014:
Average
exchange
rate
Foreign
currency
(million)
Outstanding contracts
2014
2013
2014
2013
Sell US Dollars:
3 to 6 months
6 to 9 months
1.21
1.21
1.37
–
2.5
4.0
0.5
–
Contract
value
(€ million)
2014
2.0
3.3
5.3
2013
0.4
–
0.4
Fair
value
(€ million)
2014
Fair
value
(£ million)
2013
2014
2013
(0.1)
(0.1)
(0.2)
–
–
–
(0.1)
(0.1)
(0.2)
–
–
–
The following table details the South African Rand (ZAR) foreign currency contracts outstanding as at 27 December 2014:
Outstanding contracts
2014
2013
2014
2013
2014
2013
2014
2013
2014
2013
Average
exchange
rate
Foreign
currency
(million)
Contract
value
(ZAR million)
Fair
value
(ZAR million)
Fair
value
(£ million)
Buy Sterling:
Less than 3 months
INTEREST RATE RISK MANAGEMENT
–
16.75
–
6.6
–
110.0
–
5.2
–
0.3
The Group is exposed to interest rate risk on borrowings. The risk is managed by maintaining an appropriate mix between fixed and floating rate borrowings
and by the use of derivative financial instruments such as interest rate swaps to minimise the risk associated with variable interest rates. At the year end
12.8% of the Group’s borrowings were covered by interest rate swaps (2013: 11.2%). The Group has in issue £332 million (2013: £332 million) of 8.25% and
£150 million (2013: £150 million) of 8.75% fixed rate Senior Secured Notes that are both listed on the Irish Stock Exchange (see note 23). Use of interest
rate derivatives is governed by Group policies which are approved by the Board.
INTEREST RATE SENSITIVITY ANALYSIS
Interest rate sensitivity analysis has been performed on the financial assets and liabilities to illustrate the impact on Group profits and equity if interest
rates increased/decreased. This analysis assumes the liabilities outstanding at the period end were outstanding for the whole period. A 100 basis points
increase or decrease has been used, comprising management’s assessment of reasonably possible changes in interest rates.
£ million
Effects of 100 basis points increase in interest rate
Effects of 100 basis points decrease in interest rate
It is assumed that all other variables remained the same when preparing the interest rate sensitivity analysis.
Profit/(loss)
Profit/(loss)
27 December 28 December
2013
2014
0.5
(0.5)
(0.3)
0.3
72 / Bakkavor Annual Report and Accounts 2014
Notes to the consolidated financial statements
CONTINUED
29
FINANCIAL INSTRUMENTS CONTINUED
INTEREST RATE SWAPS
Under interest rate swap contracts, the Group agrees to exchange the difference between fixed and floating rate interest amounts calculated on
agreed notional principal amounts. Such contracts enable the Group to mitigate the risk of changing interest rates on the fair value of issued fixed rate
borrowings held and the cash flow exposures on the issued variable rate borrowings held. The fair value of interest rate swaps at the reporting date is
determined by discounting the future cash flows using the yield curves at the reporting date and the credit risk inherent in the contract, and is disclosed
below. The average interest rate is based on the outstanding balances at the end of the financial year.
The following table details the notional principal amounts and remaining terms of interest rate swap contracts outstanding as at 27 December 2014:
Average contract fixed
interest rate
Notional
principal amount
Fair value
2014
%
2013
%
2014
£ million
2013
£ million
2014
£ million
2013
£ million
Interest rate swaps
1 to 2 years
4.90
4.90
63.2
63.2
(4.5)
(6.4)
The interest rate swaps settle on a quarterly basis. The floating rate on the interest rate swaps is 3 months LIBOR. The Group will settle the difference
between fixed and floating interest rates on a net basis.
CREDIT RISK MANAGEMENT
Credit risk refers to the risk of financial loss to the Group if a counterparty defaults on its contractual obligations of the loans and receivables at amortised
cost held in the statement of financial position.
The Group’s main credit risk is attributable to its trade receivables. The Group’s top four customers, all leading UK retailers, continue to represent more
than 76% (2013: 75%) of the Group’s revenue. These customers have favourable credit ratings and consequently reduce the credit risk for the Group’s
overall trade receivables.
The credit risk on liquid funds and derivative financial instruments is limited because the counterparties are banks with good credit ratings assigned by
international credit rating agencies. Group policy dictates that Group deposits are shared between banks to spread the risk. Currently Group deposits
are shared between banks that are counterparties in the Group’s secured committed bank facilities. Bakkavor Finance (2) plc’s current bank credit limit
consists of a £60 million Term loan, of which £50 million has been repaid and a £70 million RCF facility, through a bank syndicate. Barclays Capital is the
syndicate agent of this facility and they manage the syndicate and participation with other counterparties.
Processes are in place to manage receivables and overdue debt and to ensure that appropriate action is taken to resolve issues on a timely basis.
Credit control operating procedures are in place to review all new customers. Existing customers are reviewed as management become aware of
changes of circumstances for specific customers. The amounts presented in the statement of financial position are net of appropriate allowance for
doubtful trade receivables, specific customer risk and assessment of the current economic environment. The carrying amount of financial assets
recorded in the financial statements, which is net of impairment losses, represents the Group’s maximum exposure to credit risk.
COMMODITY RISK MANAGEMENT
The Group acquires substantial amounts of raw materials for its operations, including dairy, wheat and rapeseed oil. The Group is exposed to commodity
price and supply risks for these raw materials. The Group takes action to reduce overall material costs and exposure to price fluctuations by sourcing raw
materials from suppliers all over the world, thereby decreasing geographic risk and also frequently tenders to benchmark market prices. In general our
requirements are managed using contracts for periods of between three to twelve months forward. The Group also manage any local currency exposure
in line with agreed contracts.
LIQUIDITY RISK MANAGEMENT
Liquidity risk refers to the risk that the Group may not be able to fund the day to day running of the Group. The Group manages liquidity risk by monitoring
actual and forecast cash flows and matching the maturity profiles of financial assets and liabilities. The Group also monitors the drawdown of borrowings
against the available banking facilities and reviews the level of reserves. Liquidity risk management ensures sufficient borrowings funding is available
for the Group’s day to day needs. Group policy is to maintain reasonable headroom of unused committed bank facilities in a range of maturities at least
12 months beyond the period end.
Notes to the consolidated financial statements
CONTINUED
ar14.bakkavor.com / 73
29
FINANCIAL INSTRUMENTS CONTINUED
MATURITY PROFILE OF FINANCIAL LIABILITIES
The following table illustrates the Group’s remaining contractual maturity for its financial liabilities when they fall due.
£ million
Due within one year:
Trade payables
Other payables
Derivative financial instruments
Borrowings
Finance leases
Interest on borrowings
Total due within one year
In the second to fifth years inclusive:
Other payables
Borrowings
Finance leases
Interest on borrowings
Total due in the second to fifth years
Due after five years:
Borrowings
Finance leases
Interest on borrowings
Total due after five years
The weighted average interest rates for the Group’s borrowings are found in note 23 and in note 26 for Finance leases.
30
SHARE CAPITAL AND RESERVES
SHARE CAPITAL
£ million
Issued and fully paid:
27 December 28 December
2013
2014
211.1
42.1
6.9
1.9
0.4
11.9
274.3
0.2
344.8
1.3
120.7
467.0
150.0
0.4
6.6
157.0
203.6
29.8
8.0
35.4
0.4
55.3
332.5
0.1
382.6
1.5
153.8
538.0
150.0
0.7
19.7
170.4
27 December 28 December
2013
2014
55,258 (2013: 55,258) Ordinary shares of £1 each
0.1
0.1
SHARE PREMIUM
The share premium account represents amounts received by the Company over and above the nominal value of the shares sold.
MERGER RESERVE
The incorporation of Bakkavor Finance (2) plc as an intermediate holding company of the Group in 2011 was accounted for using the principles of merger
accounting.
CAPITAL RESERVE
The capital reserve of £4.0 million arose in 2009 following the capitalisation of an inter-company balance between Bakkavor London Limited and
Bakkavor Group ehf.
TRANSLATION RESERVE
The translation reserve represents foreign exchange rate differences arising on the consolidation of the Group’s foreign operations. The assets and
liabilities of the Group’s foreign operations are translated at exchange rates prevailing on the statement of financial position date. Income and expense
items are translated at the average exchange rates for the period. Exchange differences arising, if any, are recognised in the translation reserve.
74 / Bakkavor Annual Report and Accounts 2014
Notes to the consolidated financial statements
CONTINUED
NON-CONTROLLING INTERESTS
The summarised information below represents amounts, before intragroup eliminations, of Italpizza Srl, the Group’s subsidiary with material non-
controlling interests. Notes 17 and 32 provide summary information of the subsidiary and the disposal of 40% of the Group’s 100% holding, respectively.
ITALPIZZA SRL
£ million
Statement of financial position
Non-current assets
Current assets
Current liabilities
Non-current liabilities
Income statement and statement of other comprehensive income
Revenue
Profit attributable to owners of the Company
Profit attributable to the non-controlling interests
Other comprehensive expense attributable to owners of the Company
Other comprehensive expense attributable to the non-controlling interests
Cash flow statement
Net cash inflow from operating activities
Net cash outflow from investing activities
Net cash outflow from financing activities
The table below provides a reconciliation of non-controlling interests:
£ million
Cost of investment at 7 May 2014
Share of profit for the period
Exchange differences
Balance at 27 December 2014
DISPOSALS
27 December
2014
3.1
21.1
(16.8)
(2.8)
59.1
2.5
0.7
(0.5)
(0.4)
5.7
(1.6)
(4.9)
8.5
0.7
(0.4)
8.8
DISPOSAL OF INVESTMENT
On 7 May 2014, the Group completed the sale of 40% of its 100% holding in Italpizza Srl for a total cash consideration of €9.0 million (£7.4 million). This
transaction was accounted for as an equity transaction as the Group has decreased its stake in an existing subsidiary without any changes in control.
The net effect of the transaction was as follows:
£ million
Carrying value of disposed 40% investment
Disposal costs
Amount recognised within equity attributable to equity holders of the parent
Total cash consideration
Net cash consideration is £7.3 million after paying £0.1 million in disposal costs.
7 May
2014
8.5
0.1
(1.2)
7.4
31
32
Notes to the consolidated financial statements
CONTINUED
ar14.bakkavor.com / 75
32
DISPOSALS CONTINUED
DISPOSAL OF SUBSIDIARIES
On 13 January 2014, the Group completed the sale of Spring Valley Foods, its South African Prepared Fruit Business for a cash consideration of
ZAR 110.0 million (£6.6 million). This transaction resulted in a profit on disposal of £1.9 million being recorded in the income statement.
The net assets of the business at the date of disposal and total cash consideration received were as follows:
£ million
Property, plant and equipment
Inventories
Trade and other receivables
Cash and cash equivalents
Trade and other payables
Derivative financial instruments
Net assets
Disposal costs
Recycle net foreign exchange losses
Profit on disposal
Total cash consideration
13 January 28 December
2013
2014
0.6
1.3
2.6
2.5
(2.9)
(2.3)
1.8
0.6
1.2
3.1
2.4
(2.8)
(2.1)
2.4
0.6
1.7
1.9
6.6
In 2013 the net assets of Spring Valley Foods were classified as held for sale in the statement of financial position. Total assets classified as held for sale
amounted to £7.0 million and total liabilities associated with assets classified as held for sale were £5.2 million.
The cash inflow arising on disposal of the business was as follows:
£ million
Total cash consideration
Cash disposed of with business
Disposal costs
Net cash consideration received
13 January
2014
6.6
(2.4)
(0.6)
3.6
In March 2014, the Group incurred and paid costs of £0.1 million, relating to the Czech business Heli Foods Fresh A.S. which was disposed of by the
Group in December 2013.
The Group therefore recorded a net profit on disposal of £1.8 million, relating to the sale of both businesses.
2013
On 3 April 2013 the Group completed the sale of its French and Spanish businesses comprising Cinquieme Saison Saint-Pol SAS, Cinquieme Saison
Macon SAS, Bakkavor France SAS, Crudi SAS and Sogesol SA for a cash consideration of €32.9 million (£28.0 million) debt free and cash free. The
Group incurred disposal costs of £1.2 million in 2013 relating to this disposal. This transaction resulted in a profit on disposal of £15.5 million, of which
£2.3 million relates to the recycling of foreign exchange gains. The profit on disposal has been recorded in the income statement within discontinued
operations which also includes £3.9 million of trading profit. £0.3 million of which is included within non-recurring items.
On 11 December 2013, the Group completed the sale of its Czech business Heli Food Fresh A.S. for a cash consideration of €0.3 million (£0.2 million)
debt free. This transaction resulted in a profit on disposal of £1.8 million, of which £2.4 million relates to the recycling of foreign exchange gains. The profit
on disposal has been recorded within the income statement in 2013 with a loss of £0.1 million being recognised in 2014.
76 / Bakkavor Annual Report and Accounts 2014
Notes to the consolidated financial statements
CONTINUED
NOTES TO THE STATEMENT OF CASH FLOWS
33
£ million
Operating profit – continuing operations
Operating profit – discontinued operations
Adjustments for:
Share of results of associates
Depreciation of property, plant and equipment
Amortisation of intangible assets
Profit on disposal of property, plant and equipment
Profit on disposal of subsidiaries (note 32)
Impairment of assets
Net retirement benefits charge less contributions
Operating cash flows before movements in working capital
(Increase)/decrease in inventories
Increase in receivables
Increase in payables
Increase/(decrease) in exceptional creditor
Decrease in provisions
Cash generated by operations
Income taxes paid
Interest paid
Net cash from operating activities
Restated
27 December 28 December
2013
2014
67.1
–
67.1
(1.0)
36.0
8.7
(1.0)
(1.8)
4.1
(3.8)
41.2
16.4
57.6
(1.2)
38.2
8.7
–
(17.3)
21.7
(3.7)
108.3
104.0
(5.6)
(12.8)
46.7
0.8
(0.3)
137.1
(1.0)
(49.7)
86.4
2.0
(3.8)
15.0
(1.5)
(0.9)
114.8
(2.8)
(63.9)
48.1
34
CONTINGENT LIABILITIES AND COMMITMENTS
The Group may from time to time, and in the normal course of business, be subject to claims from customers and counterparties. The Group regularly
reviews all of these claims to determine any possible financial loss to the Group. No provision was considered necessary in the consolidated financial
statements. In addition, there are a number of legal claims or potential claims against the Group, the outcome of which cannot at present be foreseen.
Provision has been made for all probable liabilities.
As at 27 December 2014 the Group had purchase commitments for the next 12 months to guarantee supply and price of raw materials of £115.9 million
(2013: £119.1 million).
Notes to the consolidated financial statements
CONTINUED
35
OPERATING LEASE ARRANGEMENTS
THE GROUP AS LESSEE
£ million
Continuing operations
ar14.bakkavor.com / 77
2014
2013
Minimum lease payments under operating leases recognised as an expense in the period
11.8
11.7
At the statement of financial position date, the Group had outstanding commitments for future minimum lease payments under non-cancellable
operating leases, which fall due as follows:
Land and buildings
Other
£ million
Operating leases which expire:
Within one year
Within two to five years
After five years
27 December 28 December 27 December 28 December
2013
2014
2014
2013
7.1
26.5
42.1
75.7
6.6
26.7
46.2
79.5
3.6
5.0
0.1
8.7
3.6
4.7
–
8.3
The Group leases various offices and operational facilities under non-cancellable operating lease arrangements. The leases have various terms, escalation
clauses and renewal rights. The Group also leases plant and machinery under non-cancellable operating lease agreements.
36
RETIREMENT BENEFIT SCHEMES
The Group operates a number of pension schemes in the UK and overseas. These schemes are either trust or contract based and have been set up in
accordance with appropriate legislation. The assets of each of the pension schemes are held separately from the assets of the Company.
In the UK, the two main schemes are a defined contribution scheme which is open to all UK employees joining the Group (full or part time) and the other
is the Bakkavor Pension Scheme, a funded defined benefit scheme which provides benefits on a final salary basis and was closed to future accrual in
March 2011.
Pension costs charged in arriving at profit on ordinary activities before taxation were:
£ million
UK defined benefit scheme net charge
UK defined contribution scheme net charge
Overseas net charge
Total charge
DEFINED CONTRIBUTION SCHEMES
2014
0.8
6.1
0.2
7.1
Restated
2013
0.5
5.4
0.3
6.2
The total cost charged to income of £6.3 million (2013: £5.7 million) represents contributions payable to these schemes by the Group at rates advised
by the Group to all employees, subject to the minimum requirements set out in legislation. No amounts were owing at the period end for the defined
contribution schemes (2013: £nil).
78 / Bakkavor Annual Report and Accounts 2014
Notes to the consolidated financial statements
CONTINUED
36
RETIREMENT BENEFIT SCHEMES CONTINUED
DEFINED BENEFIT SCHEMES
A full actuarial valuation of plan assets and the present value of the defined benefit obligation for funding purposes was carried out at 31 March 2013.
The results were updated for IAS 19 (revised 2011) ‘Employee Benefits’ purposes to 27 December 2014 by a qualified independent actuary with Towers
Watson Limited. The projected unit cost method was used to value the liabilities.
The major assumptions used in this IAS 19 valuation were:
Future pension increases
Discount rate applied to scheme liabilities
Inflation assumption (CPI)
27 December 28 December
2013
2014
3.00%
3.85%
2.15%
3.25%
4.60%
2.45%
The mortality table is based on scheme specific postcode fitted SAPS tables with a 102% multiplier for male members and 108% multiplier for female
members. Long cohort improvements are applied from 2002 to 2010. Future improvements are in line with CMIB 2013 improvements model with a 1.0%
pa long term trend, giving life expectancies as follows:
Males expected
future lifetime
2014
Males expected
future lifetime
2013
Females expected
future lifetime
2014
Females expected
future lifetime
2013
Member aged 45
Member aged 65
41.9
22.3
41.8
22.2
44.1
24.3
44.1
24.2
The sensitivities regarding the principal assumptions used to measure the scheme liabilities are set out below:
Assumption
Discount rate
Rate of inflation
Life expectancy
Change in assumption
Approximate impact on scheme liabilities
Increase/decrease by 1.0%
Decrease £39.0 million/increase £49.2 million
Increase/decrease by 0.5%
Increase £15.2 million/decrease £14.3 million
Members assumed to be one year
younger than their actual age
Increase £7.5 million
Amounts recognised in income in respect of these defined benefit schemes are as follows:
£ million
Past service cost
Net interest on net defined benefit asset
Administration costs incurred during the period
Total charge
2014
0.1
(0.3)
1.0
0.8
Restated
2013
–
(0.6)
1.1
0.5
All of the charges for each period presented have been included in total administrative expenses and actuarial gains and losses have been reported in
other comprehensive income.
The actual return on scheme assets was an increase of £31.7 million (2013: £8.3 million increase).
The amount included in the statement of financial position arising from the Group’s obligations in respect of its defined benefit retirement benefit
schemes is as follows:
£ million
Fair value of scheme assets
Present value of defined benefit obligations
Surplus in scheme
Related deferred taxation liability
27 December 28 December
2013
2014
220.2
(213.5)
6.7
(1.3)
5.4
191.2
(188.6)
2.6
(0.5)
2.1
Notes to the consolidated financial statements
CONTINUED
ar14.bakkavor.com / 79
36
RETIREMENT BENEFIT SCHEMES CONTINUED
The assumptions used by the Actuary are the best estimates chosen from a range of possible actuarial assumptions which, due to the timescale covered,
may not necessarily be borne out in practice.
Movements in the present value of defined benefit obligations (DBO) were as follows:
£ million
Opening balance
Interest cost on the DBO
Benefits paid from scheme assets
Actuarial gain – experience
Actuarial loss – demographic assumptions
Actuarial loss – financial assumptions
Past service cost
Closing balance
Movements in the fair value of scheme assets were as follows:
£ million
Opening balance
Interest income on scheme assets
Return on scheme assets greater/(less) than discount rate
Contributions from the sponsoring Companies
Benefits paid from scheme assets
Administrative costs paid
Closing balance
The analysis of the scheme assets at the statement of financial position date was as follows:
£ million
Structured UK equity
Overseas equity
High yield bonds
Property
Corporate bonds
Fixed interest government bonds
Index linked government bonds
Cash
Other
27 December 28 December
2013
2014
(188.6)
(175.8)
(8.5)
6.3
–
(0.2)
(22.4)
(0.1)
(7.9)
6.0
0.4
–
(11.3)
–
(213.5)
(188.6)
27 December 28 December
2013
2014
191.2
8.8
22.9
4.6
(6.3)
(1.0)
220.2
185.8
8.5
(0.2)
4.2
(6.0)
(1.1)
191.2
Fair value of assets
27 December 28 December
2013
2014
6.6
32.9
20.6
9.1
48.7
8.2
65.0
17.6
11.5
6.6
21.6
45.0
8.5
39.8
5.7
45.1
12.1
6.8
220.2
191.2
Structured UK equity provides exposure to UK equities but is a derivative based solution and not a direct investment in equities.
The scheme assets also include swaps to hedge liability inflation and interest rate risks. The swap value has been included in the value of the gilt
securities used as collateral for the swaps. Corporate bonds and cash are also used as collateral for the swaps in place.
The Scheme invests in diversified growth funds which invest in a wide range of assets including alternative asset classes. In the summary above,
the diversified growth funds have been split into the relevant constituent asset classes.
The Bakkavor Pension Scheme operates under trust law and is managed and administered by the Trustee on behalf of the members in accordance
with the terms of the Trust Deed and Rules and relevant legislation. The Scheme is subject to the scheme specific funding requirements as outlined
in UK legislation. The most recent scheme specific funding valuation was at 31 March 2013.
80 / Bakkavor Annual Report and Accounts 2014
Notes to the consolidated financial statements
CONTINUED
36
37
RETIREMENT BENEFIT SCHEMES CONTINUED
The Group and the Trustees work closely together in matters concerning the Bakkavor Pension Scheme. Regular meetings and correspondence on
matters concerning the Scheme are shared in an open manner between both parties.
The Bakkavor Pension Scheme’s current investment strategy adopts a policy of broadly 55% in growth seeking assets and 45% in bonds, although
the proportions can vary significantly in order to allow for advanced liability hedging techniques. A large proportion of both interest and inflation risk is
hedged. The strategy is intended to reduce the risk of significant changes to the funding level by hedging key risks, while retaining a proportion of return
seeking assets to minimise long term costs by maximising return within an acceptable level of risk. The Scheme’s assets are held separately from those
of the Group.
The weighted average duration of the Bakkavor Pension Scheme is approximately 20 years.
The actual amount of employer contributions expected to be paid to the pension scheme during 2015 is £4.5 million. Employer contributions, except for
deficit reduction contributions, ceased in March 2011 when the scheme closed to future accrual. Employee contributions also ceased at this date.
Following the closure of the Scheme to future accrual in March 2011, the Group and the Trustee agreed that members who were active members of the
Scheme at the date of closure would remain entitled to access early retirement on preferential terms as long as they remained in employment within
the Group. The value of members accessing these preferential terms is not included in the defined benefit obligation as this benefit is not funded for in
advance. If members choose to access this benefit an employer contribution is made to the Scheme to reflect the increase in expected future pension
costs. In 2014 the total contributions made in respect of this benefit were £0.1 million (2013: £nil).
The current deficit reduction contributions were agreed between the Group and the Trustees as part of the 2013 triennial valuation. The deficit
contributions will be paid over a six year recovery period ending on 31 March 2020. The recovery contributions are paid monthly and the agreed rates
were £4.5 million in the years ending March 2015 and 2016, £2.0 million in the year ending March 2017 and £1.0 million per annum in subsequent years
until 31 March 2020. £4.5 million was also paid over the year to 31 March 2014 in line with the previous recovery contribution schedule in force.
RELATED PARTY TRANSACTIONS
Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosed in this
note. Transactions between the Company and its subsidiaries and associates are disclosed in the Company’s separate financial statements.
TRADING TRANSACTIONS
During the period, Group companies entered into the following transactions with related parties who are not members of the Group:
£ million
Bakkavor Group Limited
Bakkavor Group ehf.
Royalty charge
Amounts owed from
related parties
Amounts owed to
related parties
2014
2013
2014
2013
2014
2013
1.2
–
1.2
–
–
0.1
–
0.1
2.4
0.1
1.2
0.1
The amount owed from Bakkavor Group ehf of £0.1 million (2013: £0.1 million) is included within the current assets section under Trade and other
receivables. Amounts owed to Bakkavor Group ehf of £0.1 million (2013: £0.1 million) and the royalty charge to Bakkavor Group Limited, of £2.4 million
(2013: £1.2 million), are included in the current liabilities section within Trade and other payables.
Loans between the Group and related parties are all based on varying terms of interest. Related party loans are repayable between one and five years
and incur interest based on the three month libor rate plus 3%.
The amounts outstanding are unsecured. No guarantees have been given or received. No provisions have been made for doubtful debts in respect of the
amounts owed by related parties.
REMUNERATION OF KEY MANAGEMENT PERSONNEL
The remuneration of the Directors and senior management, who are the key management personnel of the Company, is set out below in aggregate for
each of the categories specified in IAS 24 ‘Related Party Disclosures’.
£ million
Short-term employee benefits
Post-employment benefits
2014
2013
5.5
0.3
5.8
4.6
0.3
4.9
Notes to the consolidated financial statements
CONTINUED
ar14.bakkavor.com / 81
38
39
EVENTS AFTER THE STATEMENT OF FINANCIAL POSITION DATE
On 12 January 2015, the Group completed the acquisition of the trade and assets of B. Robert’s Foods, a private label fresh prepared foods manufacturer
based in Charlotte, North Carolina in the United States of America for a cash consideration of £19 million (US$ 30 million). Under the completion
mechanism for the transaction the final value of the assets purchased will be determined by 12 May 2015 and therefore at the date of approval of the
Group’s consolidated financial statements the initial accounting for the transaction cannot be determined. The Group has therefore taken advantage
of the exemption under IFRS 3 ‘Business Combinations’, available in these circumstances, not to disclose any further information in respect of the
transaction at this time.
CONTROLLING PARTY
The Company’s ultimate parent company and ultimate controlling party is Bakkavor Group Limited, a Company registered in the United Kingdom.
The largest Group in which the results of the Group are consolidated is that headed by Bakkavor Group Limited. It has included this Group in its group
financial statements, copies of which are available from 5th Floor, 3 Sheldon Square, Paddington Central, London, W2 6HY, United Kingdom.
The Company’s immediate parent company is Bakkavor Finance (1) Limited.
82 / Bakkavor Annual Report and Accounts 2014
Company income statement
52 WEEKS ENDED 27 DECEMBER 2014
£ million
Continuing operations
Other administrative costs
Royalty charge
Operating loss
Investment revenue
Finance costs
Loss before tax
Tax
Result and total comprehensive income for the period
The accompanying notes are an integral part of this income statement.
52 weeks
ended
52 weeks
ended
27 December 28 December
2013
2014
Notes
(0.6)
(1.2)
(1.8)
0.1
(47.9)
(49.6)
49.6
–
–
(1.2)
(1.2)
–
(57.8)
(59.0)
59.0
–
4
5
6
The Company has no recognised gains and losses other than the result above, and therefore no separate statement of comprehensive income
is presented.
Company statement of changes in equity
52 WEEKS ENDED 27 DECEMBER 2014
£ million
Share
capital
Share
premium
Retained
earnings
Total
equity
Balance at 29 December 2012, 28 December 2013 and 27 December 2014
0.1
315.2
(34.0)
281.3
Company statement of financial position
27 DECEMBER 2014
ar14.bakkavor.com / 83
£ million
Non-current assets
Investment in subsidiaries
Current assets
27 December 28 December
2013
2014
Notes
8
929.4
929.4
Amounts due from other group companies
12
53.0
59.0
Current liabilities
Other payables
Borrowings
Amounts due to other group companies
Non-current liabilities
Borrowings
Net assets
Equity
Share capital
Share premium
Retained earnings
Total equity
7
12
7
11
(0.6)
(42.7)
(175.2)
(218.5)
(482.6)
281.3
0.1
315.2
(34.0)
281.3
–
(23.1)
(166.0)
(189.1)
(518.0)
281.3
0.1
315.2
(34.0)
281.3
The financial statements of Bakkavor Finance (2) plc, company number 7501697, and the accompanying notes, which form an integral part of the
Company financial statements, were approved by the Board of Directors on 11 February 2015. They were signed on behalf of the Board of Directors by:
A Gudmundsson
Director
84 / Bakkavor Annual Report and Accounts 2014
Company statement of cash flows
52 WEEKS ENDED 27 DECEMBER 2014
£ million
Operating loss
Decrease in receivables
Increase in payables
Cash generated by operations
Interest paid
Net cash generated from operating activities
Investing activities:
Interest received
Financing activities:
Increase in borrowings
Repayment of borrowings
Net cash used in financing activities
Net cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
52 weeks
ended
52 weeks
ended
27 December 28 December
2013
2014
(1.8)
55.6
9.2
63.0
(44.3)
18.7
(1.2)
–
133.2
132.0
(58.2)
73.8
0.1
–
25.4
(44.2)
(18.8)
–
–
–
208.1
(281.9)
(73.8)
–
–
–
Notes to the company financial statements
52 WEEKS ENDED 27 DECEMBER 2014
ar14.bakkavor.com / 85
GENERAL INFORMATION
Bakkavor Finance (2) plc (the ’Company’) is a Public Limited Company whose ultimate parent company and controlling party is Bakkavor Group Limited,
a company registered in the United Kingdom.
SIGNIFICANT ACCOUNTING POLICIES
The separate financial statements of the Company are presented as required by the Companies Act 2006. As permitted by that Act, the separate
financial statements have been prepared in accordance with International Financial Reporting Standards (IFRSs) as issued by the International Accounting
Standards Board (IASB). The financial statements have also been prepared in accordance with IFRSs adopted by the European Union.
The financial statements have been prepared on the historical cost basis. The principal accounting policies adopted are the same as those set out in note
2 to the consolidated financial statements except as set out below.
Investments in subsidiaries are stated at cost less, where appropriate, provisions for impairment.
Going concern for the Company has been considered along with the Group by the Directors. This consideration is set out in note 3 to the consolidated
financial statements.
EMPLOYEES, DIRECTORS AND AUDIT REMUNERATION
Audit fees of £73,000 (2013: £73,000) for the period ended 27 December 2014 have been borne by fellow group company, Bakkavor Foods Limited.
The Company has no employees and payments to Directors for the period ended 27 December 2014 (2013: £nil) have been borne by fellow group
company, Bakkavor Foods Limited.
INVESTMENT REVENUE
£ million
Interest on bank deposits
FINANCE COSTS
£ million
Interest on borrowings
Amortisation of refinancing costs
Interest on loans from other group companies
2014
0.1
2014
43.7
3.6
0.6
47.9
2013
–
2013
43.9
9.1
4.8
57.8
1
2
3
4
5
86 / Bakkavor Annual Report and Accounts 2014
Notes to the company financial statements
CONTINUED
TAX
The credit for the period can be reconciled to the loss per the income statement as follows:
Loss before tax
Group relief surrendered at tax rate of 100% (2013: 100%)
Tax credit and effective tax rate for the period
6
7
BORROWINGS
£ million
Bank overdraft
Bank loans
8.25% Senior Secured Notes
8.75% Senior Secured Notes
Borrowings repayable as follows:
On demand or within one year
In the second year
In the third to fifth years inclusive
Over five years
Analysed as:
Amount due for settlement within 12 months (shown within current liabilities)
Amount due for settlement after 12 months
All borrowings are denominated in Sterling.
INVESTMENTS IN SUBSIDIARIES
8
£ million
Balance at 28 December 2013 and 27 December 2014
2014
2013
£ million
%
£ million
%
(49.6)
(100.0)
(59.0)
(100.0)
49.6
49.6
100.0
100.0
59.0
59.0
100.0
100.0
27 December 28 December
2013
2014
35.5
7.9
337.0
144.9
525.3
42.7
6.6
327.9
148.1
525.3
42.7
482.6
525.3
10.1
51.8
335.3
143.9
541.1
23.1
11.4
359.5
147.1
541.1
23.1
518.0
541.1
Investment
in Group
companies
929.4
Notes to the company financial statements
ar14.bakkavor.com / 87
CONTINUED
SUBSIDIARIES
As at 27 December 2014, Bakkavor Finance (2) plc held investments in the share capital of the following companies (ownership in dormant companies
have not been listed):
9
Place of registration
and operation Principal activity
United Kingdom Holding company
Name
Directly held investments:
Bakkavor Finance (3) Limited
Indirectly held investments:
Bakkavor Foods Limited
Anglia Crown Limited
Bakkavor Fresh Cook Limited
Vaco BV
Creative Food Group Limited (includes 13 further subsidiaries
and 1 branch within Hong Kong and China)
Italpizza Srl
Two Chefs on a Roll Inc
Gastro Primo Limited
Bakkavor Estates Limited
Bakkavor Finance Limited
Bakkavor Iberica S.A.
United Kingdom Preparation and marketing of fresh prepared foods
United Kingdom Preparation and marketing of fresh prepared foods
United Kingdom Preparation and marketing of fresh prepared foods
Belgium Preparation and marketing of fresh prepared foods
Hong Kong Produce and manufactures salad products
Italy Manufacture of branded and private label pizza products
Hong Kong Preparation and marketing of fresh prepared foods
United Kingdom Property management
United Kingdom Customer invoicing and financing of receivables
Spain Distribution
USA Manufacture of custom and private label savoury and bakery products
100%
Bakkavor Central Finance Limited
United Kingdom Customer invoicing and financing of receivables
Bv Foodservice Limited
Bakkavor London Limited
Bakkavor Acquisitions (2008) Limited
Bakkavor USA Inc
Bakkavor USA Limited
Bakkavor (Acquisitions) Limited
Bakkavor Limited
Bakkavor European Marketing BV
Bakkavor China Limited
Bakkavor Asia Limited
Bakkavor Invest Limited
Bakkavor Foods Canada Inc
English Village Salads Limited
Notsallow 256 Limited
Bakkavor Overseas Holdings Limited
Exotic Farm Produce Limited
Bakkavor Maroc
United Kingdom Distribution of fresh prepared foods
United Kingdom Holding company
United Kingdom Holding company
USA Holding company
United Kingdom Holding company
United Kingdom Holding company
United Kingdom Holding company
Netherlands Holding company
United Kingdom Holding company
United Kingdom Holding company
United Kingdom Holding company
Canada Non-trading
United Kingdom Non-trading
United Kingdom Non-trading
United Kingdom Non-trading
United Kingdom Non-trading
Morocco Non-trading
Interest
100%
100%
100%
100%
100%
100%
60%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
88 / Bakkavor Annual Report and Accounts 2014
Notes to the company financial statements
CONTINUED
10
FINANCIAL INSTRUMENTS
FOREIGN CURRENCY RISK
The Company is not exposed to any foreign currency risk as its borrowings are all in Pounds Sterling.
INTEREST RATE RISK MANAGEMENT
The Company is exposed to interest rate risk on borrowings. The risk is managed by maintaining an appropriate mix between fixed and floating rate
borrowings. The Group uses derivative financial instruments such as interest rate swaps to minimise the risk associated with variable interest rates.
INTEREST RATE SENSITIVITY ANALYSIS
Interest rate sensitivity analysis has been performed on interest bearing Company borrowings of £21.3 million (2013: £69.7 million) to illustrate the
impact on profits and equity if interest rates increased/decreased. This analysis assumes the liabilities outstanding at the period end were outstanding
for the whole period. A 100 basis points increase or decrease has been used, comprising management’s assessment of reasonably possible changes in
interest rates.
£’000
Effects of 100 basis points increase in interest rate
Effects of 100 basis points decrease in interest rate
£ million
Financial assets
Loans and receivables at amortised cost:
Amounts due from other group companies
Financial liabilities
Other Financial liabilities at amortised cost:
Other payables
Amounts due to other group companies
Borrowings
All Company borrowings are denominated in Sterling.
SHARE CAPITAL
11
Issued and fully paid:
Ordinary shares of £1 each
27 December 28 December
2013
Profit/(loss)
2014
Profit/(loss)
(2.2)
2.2
(2.3)
2.3
27 December 28 December
2013
2014
53.0
59.0
0.6
175.2
525.3
701.1
–
166.0
541.1
707.1
27 December 2014
28 December 2013
Number
£ million
Number
£ million
55,258
0.1
55,258
0.1
Notes to the company financial statements
CONTINUED
ar14.bakkavor.com / 89
12
RELATED PARTY TRANSACTIONS
TRANSACTIONS
During the period, the Company entered into the following transactions with related parties.
£ million
Group companies
Amounts owed by
related parties
2014
53.0
2013
59.0
Amounts owed to
related parties
2014
2013
175.2
166.0
Amounts owed to related parties consist of various corporate loans being £11.2 million (2013: £15.5 million) owed to Bakkavor London Limited,
£161.6 million (2013: £126.3 million) owed to Bakkavor Foods Limited, £2.4 million (2013: £1.2 million) owed to Bakkavor Group Limited and £nil
(2013: £23.0 million) owed to Bakkavor Central Finance Limited.
Amounts owed by related parties consist of £49.6 million (2013: £59.0 million) Group tax relief from various other group companies and £3.4 million
(2013: £nil) owed by Bakkavor Central Finance Limited.
These amounts are unsecured and will be settled in cash. No guarantees have been given or received. No provisions have been made for doubtful debts
in respect of the amounts owed by related parties.
Amounts are denominated in Sterling. All related party payables and receivables are held at amortised cost.
13
14
EVENTS AFTER THE STATEMENT OF FINANCIAL POSITION DATE
There were no significant events after the statement of financial position date.
CONTROLLING PARTY
The Company’s ultimate parent company and ultimate controlling party is Bakkavor Group Limited, a company registered in the United Kingdom.
The largest group in which the results of the Company are consolidated is that headed by Bakkavor Group Limited and it has included the Company
in its group financial statements. The smallest group into which the accounts are consolidated is Bakkavor Finance (2) plc.
Copies of both the Bakkavor Group Limited and Bakkavor Finance (2) plc financial statements are available from 5th Floor, 3 Sheldon Square,
Paddington Central, London, W2 6HY, United Kingdom.
The immediate parent of the Company is Bakkavor Finance (1) Limited.
90 / Bakkavor Annual Report and Accounts 2014
Company information
DIRECTORS
A Gudmundsson
L Gudmundsson
B Bjarnason
H Ludvigsson
G Sigurdsson
SECRETARY
S Witham
REGISTERED OFFICE
5th Floor
3 Sheldon Square
Paddington Central
London
W2 6HY
BANKERS
Barclays Bank PLC
Multinational Corporates
One Churchill Place
London
E14 5HP
AUDITOR
Deloitte LLP
Four Brindleyplace
Birmingham
B1 2HZ
This Annual Report has been issued for personal use and for information purposes only.
No part of this Annual Report should be published, reproduced, distributed or otherwise
made available in whole or in part to any other person without the prior written consent
of Bakkavor Finance (2) plc.
No part of this Annual Report should form the basis of, or be relied on in connection
with, any contract or commitment or investment decision whatsoever. The
information contained in this Annual Report has not been independently verified and
no representation or warranty, express or implied, is made as to, and no reliance
should be placed on, the fairness, accuracy, completeness or correctness of the
information or opinions contained herein. None of Bakkavor Finance (2) plc, any of
its parent companies or subsidiaries, or any of its affiliates, directors, managers,
officers, advisers or representatives shall have any liability whatsoever (in negligence
or otherwise) for any loss howsoever arising from any use of this document
or its contents or otherwise arising in connection with this Annual Report.
This Annual Report may include “forward looking statements” within the meaning of the
U.S. securities laws and certain other jurisdictions, based on our current expectations
and projections about future events. All statements other than statements of historical
facts included in this Annual Report including, without limitation, statements regarding
our future financial position, risks and uncertainties related to our business, strategy,
capital expenditures, projected costs and our plans and objectives for future operations,
may be deemed to be forward looking statements. These forward looking statements
are subject to a number of risks and uncertainties. By their nature, forward looking
statements involve known and unknown risks, uncertainties and other factors because
they relate to events and depend upon circumstances that may or may not occur in
the future. Although we believe that the expectations reflected in such forward looking
statements are reasonable, we can give no assurance that such expectations will
prove to be correct and that such statements are not guarantees of future performance
because they are based on numerous assumptions. Any forward looking statement
speaks only as at the date on which it is made and we undertake no obligation to
publicly update or revise any forward looking statements, whether as a result of new
information, future events or otherwise. The information contained in this Annual Report
is provided as at the date of this Annual Report and is subject to change without notice.
ar14.bakkavor.com / 91
Bakkavor group head office
5th Floor
3 Sheldon Square
Paddington Central
London W2 6HY
United Kingdom
Tel: +44 (0) 20 7266 6400
Registered in England as Bakkavor
Finance 2 (plc) No: 7501697
www.bakkavor.com
ar14.bakkavor.com
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