In a trading update covering the 13 weeks to March 27, the group said reported revenues were down 4.4% year-on-year, or 2.6% lower on a like-for-like basis.
UK like-for-like sales were down 6.4% for the quarter, and down by only 3.5% in March, Bakkavor said.
The Coronavirus (COVID-19) pandemic may have hit the company’s business but the disruption created by the initial impact of Brexit to its business and supply chain was minimal.
“We are now firmly in our second phase of managing Brexit, as further rules governing the import and export of goods become operational in the coming months. We are confident of our ongoing mitigation plans to limit further disruption,” Bakkavor said.
In the US, Bakkavor continued to experience strong like-for-like sales growth in the quarter of 17.9% in line with the levels reported at the end of 2020. Demand for freshly prepared meal solutions continues unabated and as a result, the group is looking to accelerate investments to increase capacity.
In China, first-quarter sales were up 56.2% on a year earlier with the group recovering much of the business lost in mainland China. However, it continues to see reduced demand in Hong Kong due to ongoing COVID-19 lockdown restrictions.
The group said gearing remains around 2.3 times annual underlying earnings and it continues to operate with “significant headroom” of around GBP200mln against its debt facilities of GBP538mln.
Bakkavor said uncertainty remains but there is enough visibility on sales now for the company to sanction the payment of the previously suspended dividend of 4p in respect of 2019.
Peel Hunt said there was plenty of encouraging news in Bakkavor’s statement, with all regions ahead of the broker’s forecasts.
“LFL [like-for-like] sales in the UK were -6.4% in Q1, compared to our expectations of -10%. Sales improved to -3.5% in March, with a further recovery thus far in April as restrictions have been gradually relaxed. In the US, the positive trends continued, with LFL sales growth of 17.9%. This is a strong performance, given that Q1 last year was +20% and comps are materially easier in Q2,” Peel Hunt said.
“In China, LFL sales increased by 56%. This was a healthy recovery compared to the 37% decline in Q1 last year, As a result, we are increasing our PBT estimates by c.5% and increasing our target price from 125p to 145p. We expect the improving trends to continue, particularly given the easier comps. The shares continue to look good value,” Peel Hunt said, as it reiterated its ‘buy’ recommendation.
Shares in Bakkavor were up 2.7% at 128.4p in afternoon trading.
— adds broker comment —