Bakkavor pullls guidance, suspends dividend amid Covid-19 outbreak
By Michele Maatouk
Date: Thursday 02 Apr 2020
(Sharecast News) - Fresh foods provider Bakkavor withdrew its 2020 guidance and scrapped its final dividend on Thursday due to the coronavirus pandemic.
The company said that following an "encouraging" start to the new financial year, the Covid-19 outbreak has created "significant" operational challenges, initially in China and more recently in the UK and US. This has led to increased volatility in daily order levels as well as some disruption to labour availability.
"While our colleagues and infrastructure have responded well in ensuring excellent service levels for customers, trading has been impacted and overall sales are below expectations," it said.
In the UK, which represents around 90% of group adjusted EBITDA, there has been a reduction in orders across all of its categories due to the outbreak, most notably in its salads and food-to-go products. In the US, orders have declined and the group said it is taking "appropriate actions" to limit complexity in its ranges, adapt its shift systems and review resourcing requirements.
In China, the outbreak had a significant effect on Bakkavor's business in the early months of this year. However, the situation has now stabilised, its customers have reopened most of their stores and its sites are resuming service as orders gradually rebuild.
Bakkavor withdrew the 2020 guidance it issued in February "given that market conditions are likely to remain highly uncertain for the foreseeable future". The company also said that all non-essential capital investment and discretionary expenditure has been placed on hold.
"We are reviewing capacity across our facilities to better match the current levels of demand and, wherever possible, we will be supporting any impacted colleagues by making use of the Job Retention Scheme (furlough) introduced by the Government in the UK," it said.
The company has decided to suspend the proposed final dividend and said it will review the dividend policy in due course. In addition, members of the board and management board have agreed voluntary reductions in remuneration for the coming three months. The chairman and non-executive directors have agreed to a 50% cut to their base salaries and fees, while the founders - CEO, Agust Gudmundsson and non-exec director Lydur Gudmundsson - have volunteered not to take a salary in the period.
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