Bakkavor, which warned in February the UK food business was seeing a “significant impact” from coronavirus, is now pulling financial guidance and suspending its annual dividend payment.
The London-based private-label supplier to major UK supermarkets also said today (2 April) its management team and board of directors will take a voluntary salary cut for three months, while founders chief executive Agust Gudmundsson and non-executive director Lydur Gudmundsson have volunteered not to be paid during the same period.
Listed in London, Bakkavor said in a statement “market conditions are likely to remain highly uncertain for the foreseeable future”.
When reporting annual results for the year ended in December in February, the company noted how Covid-19 was having a “significant impact” on its international business, after a “weak” performance in its domestic UK market, which generates the majority of revenues.
Today, Bakkavor said all non-essential capital investment and discretionary expenditure has been placed on hold, while it is reviewing manufacturing capacity across its facilities “to better match the current levels of demand” as the impact of Covid-19 spreads to its UK and US operations.
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And after the London Stock Exchange advised listed firms to delay issuing results because of the uncertainties associated with Covid-19 and the turmoil currently being witnessed in global stock markets, Bakkavor will now do the same, along with suspending its annual general meeting due to be held on 21 May.
Bakkavor produces a range of food items from bread to pizza, fresh vegetables and salads, and desserts. It employs 20,000 people across 45 locations in the UK, the US and China.
In the UK, which generates about 90% of Bakkavor’s group EBITDA, the company said it has seen a reduction in orders across all its categories, but salads and food-to-go products are the hardest hit. Orders in the US have also declined, prompting the business to take “appropriate actions to limit complexity in our ranges, adapt our shift systems and review resourcing requirements”.
On a brighter note, Bakkavor said the operating environment in China is now improving: “After a challenging period, this situation has now stabilised, our customers have reopened most of their stores, and our sites are resuming service as orders gradually rebuild.”
To help Bakkavor deal with the uncertainties, the company said it recently completed debt refinancing for its “core bank arrangements”, extending them until 2024. It has GBP562m (US$697.6m) in debt facilities available.
Bakkavor was criticised earlier this week by UK trade union GMB over sick pay rates paid to self-isolating staff and for alleged lack of social distancing measures in its facilities.
Today the company said that “wherever possible, we will be supporting any impacted colleagues by making use of the Job Retention Scheme introduced by the Government in the UK”.
It continued: “While our regular handwashing procedures and high levels of good manufacturing practice and hygiene ensure a safe working environment, we have also implemented a number of additional controls.
“In the UK, these include restricted visitor access, a more rigorous return-to-work procedure, more frequent cleaning regimes at touch points and additional handwashing protocols.
“All our colleagues are self-certified as fit to work, and we are adhering to PHE [Public Health England] guidelines for social distancing in our offices, rest, changing and ancillary areas, as well as following the specific PHE guidance for distancing in food manufacturing businesses.”
