Bakkavor Group plc
Annual Report & Accounts 2021
WE ARE
BAKKAVOR GROUP PLC
We are the leading provider
of fresh prepared food and
put the customer at the
heart of what we do.
Disclaimer – forward-looking statements
The 2021 Annual Report and Accounts, prepared by Bakkavor Group plc (the “Company”), may contain forward-looking statements about Bakkavor Group plc and its subsidiaries (“Bakkavor” or
“the Group”). These represent expectations for the Group’s business, and involve known and unknown risks and uncertainties, many of which are beyond the Group’s control. The Group has based
these forward-looking statements on current expectations and projections about future events. These forward-looking statements may generally, but not always, be identified by the use of words
such as ‘will’, ‘aims’, ‘anticipates’, ‘continue’, ‘could’, ‘should’, ‘expects’, ‘is expected to’, ‘may’, ‘estimates’, ‘believes’, ‘intends’, ‘projects’, ‘targets’, or the negative thereof, or similar expressions.
By their nature, forward-looking statements involve risk and uncertainty because they relate to events and depend on circumstances that may or may not occur in the future and reflect the
Group’s current expectations and assumptions as to such future events and circumstances that may not prove accurate. A number of material factors could cause actual results and
developments to differ materially from those expressed or implied by forward-looking statements. You should not place undue reliance on any forward looking statements. These forward-
looking statements are made as of the date of this Annual Report and Accounts. The Group expressly disclaims any obligation to publicly update or review these forward-looking statements
other than as required by law.
Agust Gudmundsson
Chief Executive Officer
In 2021 we delivered
robust growth and achieved
meaningful strategic
and financial progress against a
challenging backdrop. We have
continued to leverage our scale,
category leadership and expertise
to emerge in a position of strength.
Bakkavor Bakkavor_Group @Bakkavor facebook.com/Bakkavor
STRATEGIC REPORT
Financial Highlights 01
At a Glance 02
Chairman’s Statement 04
Chief Executive’s Overview 06
How We Create Value 10
Our Markets 12
Our Vision, Purpose and Values 16
Our Colleagues 18
Our Group Strategy 22
Key Performance Indicators 26
Divisional Overview 30
Trusted Partner 34
Task Force on Climate-related
Financial Disclosures 54
Financial Review 62
Stakeholder Interaction 66
Risk Management and Risks 72
GOVERNANCE
Chairman’s Letter on Corporate Governance 88
Corporate Governance Compliance Statement 91
Group Board 94
Management Board 97
Corporate Governance Report 98
Report of the Nomination and ESG Committee 108
Audit, Risk and Internal Control 112
Report of the Audit and Risk Committee 113
Directors’ Remuneration Report 120
Directors’ Report 142
Statement of Directors’ Responsibilities 147
in Respect of the Financial Statements
FINANCIAL STATEMENTS
Independent Auditors’ Report 148
Consolidated Income Statement 156
Consolidated Statement of 157
Comprehensive Income
Consolidated Statement of Financial Position 158
Consolidated Statement of Changes in Equity 159
Consolidated Statement of Cash Flows 160
Notes to the Consolidated Financial Statements 161
Company Statement ofFinancialPosition 204
Company Statement of ChangesinEquity 204
Notes to the Company Financial Statements 205
COMPANY INFORMATION
Advisers and Registered Office IBC
At a Glance 02
Chairman’s Statement 04
Chief Executive’s Overview 06
How We Create Value 10
Our Markets 12
Our Vision, Purpose and Values 16
Our Colleagues 18
Our Group Strategy 22
Key Performance Indicators 26
Divisional Overview 30
Trusted Partner 34
Task Force on Climate-related Financial Disclosures 54
Financial Review 62
Stakeholder Interaction 66
Risk Management and Risks 72
STRATEGIC
REPORT
01 – 87
2021 FINANCIAL HIGHLIGHTS
Group reported revenue
£1,871.6m
+4.4%
Operating profit
£102.0m
+64.5%
Profit before tax
£81.4m
+84.2%
Net cash from operations
£144.0m
+62.7%
Basic EPS
9.8p
+3.9p
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Bakkavor Group plc
Annual Report & Accounts 2021
STRATEGIC REPORT
Our deep understanding of consumers’ changing
needs enables us to create innovative products
for our customers around the world.
AT A GLANCE
Total sites
46
Total suppliers
>900
Total products
>3,200
10%
of Group
reported
revenue
Reported revenue
£180.1m
Operating profit
£8.9m
Core products
Meals Artisan
bread
Dips Soups, Sauces
& Burritos
Our grocery retail and direct-to-consumer customers include:
Harris Teeter
Kroger (Home Chef)
5
factories
1
head office
in Charlotte,
North Carolina
>80 >350
US
products created
this year
products in our
US portfolio
See Divisional Overview on page 32
Head office
Factory
Distribution centre
Farm (China),
growing unit (UK)
Key
Total colleagues
c.19,000
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Bakkavor Group plc
Annual Report & Accounts 2021
9
factories
1
farm
1
head office
in Shanghai
4
distribution
centres
1
head office
in London
23
factories
See Divisional Overview on page 33
See Divisional Overview on pages 30 to 31
5%
of Group
reported
revenue
85%
of Group
reported
revenue
Reported revenue
£1,592.4m
Operating profit
£97.8m
Core products
Meals Pizza &
Bread
Salads Desserts
Our grocery retail customers include:
Tesco
Co-op
M&S
Ocado
Sainsbury’s
ASDA
Waitrose
Morrisons
>340 >1,500
UK
products created
this year
products in our
UK portfolio
Reported revenue
£99.1m
Operating loss
-£4.7m
Core products
Fresh cut
salads
Food-to-go
salads
Sandwiches
and wraps
Bakery Meals, soups
& sauces
Our foodservice and retail customers include:
YUM! (including
Pizza Hut and
KFC)
Starbucks
Costa
Aldi
Pret
M&S
>550 >1,300
CHINA
products created
this year
products in our
China portfolio
Our sourcing platform is in Murcia, Spain.
1
growing
unit
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Bakkavor Group plc
Annual Report & Accounts 2021
STRATEGIC REPORT
CHAIRMAN’S STATEMENT
2021 was a year of recovery
in the UK and China, and of
accelerating growth in the
US. I would regard this as good
progress in any year, but in
the circumstances of 2021 it was
a remarkable achievement.
Simon Burke
Chairman
For Bakkavor, 2021 was a year of recovery in the
UK and China, and of accelerating growth in the
US. This is reflected in our results, where we
recorded an increase in reported revenue of 4.4%
to £1,871.6m and adjusted operating profit, our
key profit performance measure, of £102.0m,
an increase of 22.0%, and an improvement in
adjusted operating margin of 0.7% to reach 5.4%.
At the same time we brought leverage back within
our medium-term target range at 1.9x, whilst also
reintroducing dividend payments during the year.
I would regard this as good progress in any year, but in the
circumstances of 2021 it was a remarkable achievement.
Having weathered the COVID-19 lockdowns in 2020 and early
2021, our industry hoped for a return to normal trading
conditions in the second half of the year. Instead, it was
confronted with a formidable array of business challenges,
including labour shortages, wage pressures, supply chain
disruption, product shortages, and widespread and sometimes
extreme inflation across every category of raw material and
cost. These have been well-publicised and have weighed on
market valuations across our sector.
Bakkavor has a well-established and experienced
management team, a commercial philosophy and dynamic
ways of working that equip us well for really challenging
conditions like these. The sudden onset of strong inflation was
very unwelcome in the food industry and, as you would expect,
it created significant tensions between businesses like ours
and our customers. I have talked on previous occasions about
the importance of key strategic partnerships with customers,
and during this year these really came to the fore. The scale
and depth of these relationships helped us greatly, with both
parties working constructively to navigate this issue. I believe
that this was beneficial for our customers as well.
We are also accustomed to using innovation and operating
flexibly to mitigate cost increases that cannot be recovered in
pricing. Our team worked extraordinarily hard to use these
methods to cover larger gaps than we have seen before, and their
success is reflected in these figures. The ability to do this, and the
resilience it creates in difficult times, is a real differentiator of our
business. I want to record my respect and my thanks to the team
for what has been done this year. I’m afraid we will have to go on
doing it for much of 2022, as current forecasts indicate no let-up
in the challenges we face. But an outcome such as was achieved
in 2021 gives us confidence that we can weather this year too.
Market conditions in the US have been very different, although
some of the same challenges exist there too. Demand for
fresh prepared food (“FPF”) is strong and growing rapidly,
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Bakkavor Group plc
Annual Report & Accounts 2021
with the most respected names in US grocery retail all looking to
extend and deepen their offering in this segment, and we are very
pleased to be working with several of them. We are using the
same partnership model, working hand-in-hand with our
customers to develop products and extend their distribution
across the country. The result for Bakkavor, as you can see in this
report, is hugely encouraging. In the coming years we will be
aiming to keep pace with the growth in the opportunity, whilst
respecting our own standards for product quality, good factory
operation and disciplined financial returns on investment.
In China, 2021 has been a period of recovery. While ongoing
regional restrictions have continued to impact sales, we are
making progress in diversifying our customer base to include
retail and office catering players. With our investment in the
region largely complete we have clear headroom for growth
and are well-placed to capitalise on this opportunity.
Our progress with cash management during the year has also
been good, with leverage moving back inside our medium-
term target range. We were pleased to be able to reinstate
dividend payments during the year, and we now propose a final
dividend of 3.96 pence per share, which will take us to a total
dividend for 2021 of 6.60 pence per share. This would be an
increase of 10.0% on 2019 (no dividend was paid in respect of
2020). If approved by shareholders, the final dividend will be
paid on 30 May 2022.
Looking forward, we expect 2022 to be demanding for us, in
many of the same ways that 2021 was. The year has started
well, and we can see numerous opportunities ahead for
Bakkavor, both in the UK, and the US and China, which have
significant potential for growth. First, however, we have to
navigate the near-term challenges, much as we did in 2021, and
come out of this turbulent period with a business base well-
positioned to take advantage of opportunities as they come.
We were delighted to welcome two new Independent Directors
during the year, Jill Caseberry in March and Sanjeevan Bala
in August. They have both made a real difference already,
and overall I am very pleased with the strength, diversity
and team spirit of our Group Board. In two other important
developments, Jill was also appointed our designated workforce
engagement Non-executive Director, and we have extended the
scope of the Nomination Committee to include Environmental,
Social and Governance (“ESG”) matters, with Umran Beba as
our designated Group Board lead in this area. Both of these
topics are high priorities for the Group Board in 2022.
I never conclude this statement without recognising the effort
and achievement of colleagues across the business. This has
been another very demanding year, not only with continuing
COVID-19 precautions, but also the additional pressures
deriving from shortages of labour, absence necessitated by
positive COVID-19 tests, and the need to keep making the
efficiencies I described above. Our colleagues handled all of
this without missing a beat, keeping our customers satisfied
and our performance strong. I want to acknowledge this
achievement and thank them all for it.
Simon Burke
Chairman
7 March 2022
Further strengthened our Group Board
On 1 August 2021, we
welcomed Sanjeevan Bala
to the Group Board as
an Independent Non-
executive Director and
as a member of the Audit
and Risk Committee.
We strengthened our Group Board further
in 2021 with the appointment of two new
Independent Non-executive Directors.
On 1 March 2021, we
welcomed Jill Caseberry
to the Group Board, as
Independent Non-executive
Director and a member
of the Remuneration
Committee and, with
effect from 13 August 2021,
Jill became Bakkavor’s
designated workforce
engagement Non-executive
Director and is a member
of the Nomination and
ESG Committee.
See Trusted Partner on pages 34 to 53
See Group Board on pages 94 to 96
Newly formed ESG Executive Committee, a cross-
functional group of senior leaders who cascade our
Trusted Partner strategy across the business and embed
our ambitions and activities in their day-to-day roles.
Appointed Jill Caseberry as workforce engagement
Non-executive Director, which ensures colleagues
have a strong voice and representation at the most
senior level within the business.
Extended the remit of the Nomination Committee to
include ESG governance and oversight.
Appointed Umran Beba as designated Non-executive
Director on ESG matters.
Strengthening our governance
of Trusted Partner
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Annual Report & Accounts 2021
STRATEGIC REPORT
CHIEF EXECUTIVE’S OVERVIEW
GROWTH AND STRATEGIC PROGRESS DESPITE
UNPRECEDENTED INDUSTRY CHALLENGES
We have delivered robust growth and achieved meaningful
strategic progress during a year in which we have faced
unprecedented industry-wide challenges.
Whilst we, along with the wider industry, have had to manage
significant supply chain disruption and labour shortages, it
is the resilience of our business model combined with our
customer and supplier relationships, category expertise, deep
management experience and strengthened financial position
that have underpinned our progress during the year.
Our customers remain at the heart of what we do, and we have
supported them through this challenging period by ensuring
the continued availability of our products, underpinned by our
well-established global supply chain network and relentless
focus on excellence across our operations.
We are successfully managing the inflationary headwinds we
are continuing to experience across our cost base. Our
existing pass-through mechanisms are working well and we
have secured price increases across our customer base to
recover input cost and other inflation. Our focus on operational
excellence has also delivered a year-on-year improvement in
efficiency, helping to mitigate the higher cost environment.
As ever, I am incredibly proud of all of our colleagues, without
whom our strong performance would not have been possible.
I would like to personally thank them for their exceptional efforts,
which are hugely valued by our customers, suppliers, and
communities. We continue to work hard to support our colleagues’
wellbeing in these challenging times. I was particularly pleased to
relaunch our new values in the year, putting our people front and
centre of what we do and how we behave, and alongside this we
have made a significant investment in training and development.
Overall, we have continued to build on the strong foundations
put in place in previous years, and in conjunction with our
redefined values we are well-positioned to deliver long-term
sustainable growth.
A STRONG FINANCIAL PERFORMANCE AND FURTHER
STRENGTHENED OUR FINANCIAL POSITION
Despite the unprecedented challenges encountered
through 2021, we delivered a strong and resilient financial
performance across the Group. Reported revenue increased
by 4.4% to £1,871.6m, driven by the recovery in UK demand,
albeit performance was held back by the continuing supply
chain and labour challenges that have accelerated since the
summer. Our US business continued to deliver meaningful
progress with strong top-line growth, and China, whilst
showing good year-on-year growth, remains behind 2019
levels due to ongoing regional lockdowns meaning a slightly
slower recovery. Compared to 2019, the Group delivered a
1.2% increase in like-for-like revenue.
Agust Gudmundsson
Chief Executive Officer
I am proud of all our
colleagues whose exceptional
efforts have delivered a
strong financial performance,
progress on our strategic priorities
and supported our customers,
suppliers and communities.
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Bakkavor Group plc
Annual Report & Accounts 2021
Our focused and controlled approach to ramping up the
business in 2021 and managing the inflationary headwinds and
industry-wide disruption, has delivered significant progress
in profitability in the period across all three regions. Adjusted
operating profit increased by £18.4m to £102.0m and adjusted
operating margin increased by 70 basis points to 5.4%. The
Group has not incurred any exceptional costs in the period
and therefore there are no adjustments to operating profit.
We spent £55.6m during the year across our asset base. We have
invested in factory automation, with the continued roll-out of our
automated ‘smart’ manufacturing system in the UK, and have
increased our spend on payback projects that underpin our
operational excellence initiatives. Further, we have continued to
increase capacity and enhance our capabilities internationally.
The financial position of the business has continued to strengthen.
We generated £91.2m of free cash, and reduced operational net
debt by £39.7m, resulting in a further reduction to leverage (ratio
of net debt:EBITDA). Our leverage, at 1.9 times, now sits within
our target range of 1.5x to 2.0x and is the lowest since we listed
the business in 2017, and we continue to operate with significant
liquidity headroom. Our continued cash generation and robust
balance sheet position provide increased flexibility to invest
in the business for growth and we are pleased to recommend
a final dividend of 3.96 pence per Ordinary share, providing a
total dividend for the year of 6.60 pence per Ordinary share.
CLEAR FOCUS ON OUR COLLEAGUES, PRODUCTS AND
OPERATIONAL PERFORMANCE DELIVERED POSITIVE UK RECOVERY
Our clear focus on delivering innovative, great-tasting, fresh
products for our customers every day, underpinned by our
operational excellence and approach to retaining and attracting
talent, has been critical to our strong performance in the UK.
Prioritising and investing in our colleagues
Our colleagues remain our priority and I am hugely supportive
of the steps we have taken during the year to enhance ways
of working and invest in development and recognition, whilst
also being agile in our response to industry-wide labour
shortages. This positions the Group well in the context of
ongoing labour challenges.
We have implemented a range of initiatives to increase our
recruitment and manage our retention as we, along with the
wider industry, have faced a high level of vacancies and employee
turnover. Since 2019, remuneration of our senior executives has
been linked to delivering an improvement in retention and this
will continue to be a key metric for our business. More recently,
we have reset pay rates and provided additional and enhanced
benefits including free transport, referral bonuses, increased
flexibility in working patterns and upgraded site facilities.
We have also made significant investments in developing our talent
for the future, with the launch of two training programmes: an
Executive Leadership Development Programme and a Front-Line
Leaders Development Programme for all UK factory supervisors.
In recognition of the incredible work that our colleagues deliver, in
December 2021 we held our ‘Proud to Be Bakkavor’ awards. These
awards celebrated our colleagues achieving fantastic results for
our customers, colleagues, and communities. We received over
80 submissions which included a diverse set of nominations
across all areas of the business including product innovation,
excellence in operational delivery and wellbeing initiatives.
1 Alternative Performance Measures (“APMs”), including ‘like-for-like’,
‘adjusted’ and ‘underlying’, are applied consistently throughout the
Annual Report and Accounts. The APMs are defined in full and reconciled
to the reported statutory measure in Note 36 of the Notes to the
Consolidated Financial Statements.
GROUP HIGHLIGHTS
Group like-for-like revenue
1
£1,885.6m
+6.2%
2020: £1,775.1m
Adjusted operating profit
1
£102.0m
+22.0%
2020: £83.6m
Adjusted operating profit margin
1
5.4%
+70bps
2020: 4.7%
Free cash flow
1
£91.2m
+£51.1m
2020: £40.1m
UK employee turnover
27.8%
+990bps
2020: 17.9%
Total Group net carbon emissions (tCO
2
e)
135,691
-4.1%
2020: 141,538
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Annual Report & Accounts 2021
STRATEGIC REPORT
1
4
2
3
CHIEF EXECUTIVE’S OVERVIEW
CONTINUED
DELIVERING PROFITABLE AND
SUSTAINABLE GROWTH
Leveraging deep consumer insight to drive growth through
product innovation
In the UK, following initial disruption from the pandemic, we
were strongly encouraged by the recovery in sales as lockdown
restrictions eased and shopping visit frequency returned.
Against the backdrop of labour shortages and supply chain
disruption, we focused on maintaining availability of core
product lines whilst also developing innovative products to
drive growth in our categories.
We launched over 340 new products in 2021, responding to
consumers’ desire to ‘do better’ underpinned by our category
insight which focuses on the ‘big 6’ drivers of growth. We have
relaunched the full range of salads for one customer and
delivered several seasonal products to make these events
extra-special for our customers and consumers. In desserts,
we leveraged our market-leading position, consumer insights
and operational capabilities to launch two new brands, to
attract new consumers and enhance category growth.
Looking forward, our new product pipeline is well-placed
to deliver exciting, great tasting, fresh new products which
meet our customers’ and consumers’ evolving needs.
Driving further operational efficiencies
Driving superior performance across the Group through
operational excellence continues to be a strategic priority,
especially in the context of ongoing industry-wide challenges
that have accelerated through the year. We have delivered
another year of improvement, building on our strong
foundations across our operations and the supply chain.
We have also bolstered our operational excellence team, increased
our spend on payback projects and are driving bigger, bolder
change programmes on a Group-wide basis. These projects will
better empower our teams to deliver operational excellence,
with dedicated managers in place at each site, and enhanced
management reporting of operational KPIs, through the continued
roll-out of a new automated ‘smart’ manufacturing system,
which is now live at 16 UK sites. This in turn is supporting
the identification of further improvement opportunities and
enabling us to be even more targeted in our investments
to maximise returns.
We also completed an assessment of UK site automation
opportunities which has yielded a significant number of potential
opportunities and in the context of the tight labour market,
we are looking to accelerate our investment in this area.
GOOD PROGRESS IN THE US AND CHINA, WITH SIGNIFICANT
GROWTH OPPORTUNITY AHEAD
In the US, we continue to make significant progress as we
realise the benefits of the commercial and operational reset
that concluded in June 2020. Sales growth has accelerated, as
demand for our fresh, convenient products continues to grow,
and we have continued to support our strategic grocery-retail
and online customers in the development and expansion of
their offering. We successfully launched a range of fresh
meals with a strategic customer nationally and delivered our
biggest ever Thanksgiving for the US business.
Agust Gudmundsson
Chief Executive Officer
Being a trusted partner
to all our stakeholders
is key to our future
success, and we have evolved
our Group strategy to emphasise
the importance of trust in
everything that we do.
See Our Group Strategy on pages 22 to 25
UK
Drive returns
by leveraging
our #1 market
position
INTERNATIONAL
Accelerate
profitable growth
in the US and China
EXCELLENCE
Deliver superior performance through
operational excellence
TRUST
Be a trusted partner for our
colleagues, customers, suppliers
and wider communities
THROUGH OUR STRATEGIC ELEMENTS
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Annual Report & Accounts 2021
Operationally, our focus remains on capturing the significant
growth opportunity in this fast developing market. We have
enhanced and introduced initiatives to both attract new talent
and retain existing colleagues. Our investments to increase
ready meals capacity in Charlotte and Carson, to accommodate
the national supply of fresh meals, is now complete. Our
existing footprint will require further investment over the
coming years to increase capacity, and with this investment
we believe these sites can deliver $500m in revenue.
Cost headwinds, first felt acutely in the second quarter of the
year, have persisted, and whilst we have been successful in
securing price increases across our customers in the second
half of the year to help mitigate the impact, margins have been
held back. Consumer demand for our fresh, convenient food
remains strong and we are well-placed to benefit from the
accelerating growth in this market.
China continues to recover on a steady trajectory. Whilst we
have maintained our high service levels and continued to deliver
on new product development, the rate of recovery in our
foodservice customers has slowed due to an ongoing impact
from local lockdowns, thereby dampening performance.
However, the benefit of our strategic focus on entering new
channels with our existing product ranges is being realised with
new retail and catering customer wins in China. We have seen
good growth in both our Hong Kong and Bakery businesses in
2021, offsetting the weaker performance in foodservice.
With the completion of our new Wuhan facility earlier in 2021
and the new site in Xi’an due to complete in the second quarter
of 2022, we have an established national footprint and significant
headroom to continue to capitalise on the clear growth
opportunity. With this increased capacity, we expect limited
further strategic investment in the region in the coming years.
CONTINUED PROGRESS ON SUSTAINABILITY
Being a trusted partner to all our stakeholders is key to our
future success, and we have evolved our Group strategy to
emphasise the importance of trust in everything that we do.
This includes upholding our ESG responsibilities, where we
have delivered progress in the year, but also recognising that
we need to improve further.
We set out our commitment to become a Net Zero carbon
business across our Group operations by 2040 and have started
to develop our ‘roadmap’ to support the delivery of this.
Our Group net carbon emissions decreased by 4.1% in 2021
and this was driven by improvement in the UK, where net
emissions reduced by 15.0% on 2020. This is underpinned by
the investments we have made to continue to upgrade our
refrigeration systems and drive energy efficiency improvements,
with the conversion to more efficient LED lighting now complete
across the majority of our sites. We have also sought to better
understand our climate risk exposure and are voluntarily
reporting under the Task Force on Climate-related Financial
Disclosures (“TCFD”) guidelines for the first time.
To support meeting the UK Plastics Pact’s goals of eliminating
problematic plastic packaging, we have removed c.400 tonnes
of plastic in the year and increased the recyclability of our
packaging (99.8% of our packaging is recyclable). Whilst the
return in volumes to pre-pandemic levels has resulted in a
year-on-year increase in food waste, up 67 basis points to 9.15%
in 2021, we have redistributed more than 400,000 meals to
charities and recycled more than 21,000 tonnes as animal feed.
We recognise that a healthy workplace encompasses not
only keeping our colleagues safe, but also sustaining their
wellbeing and in 2021 we have enhanced the support our
colleagues receive, overseen by our newly formed Wellbeing
Steering Committee.
BUILDING ON THE GROUP’S MOMENTUM IN 2022
Bakkavor’s history is characterised by repeated and
fundamental change. In the 36 years since my brother and
I founded the Company, we have seen the business evolve
enormously, and we continue to adapt and respond to the
changing environment within which we operate. This year
will be no different.
Sales volumes in early 2022 are encouraging, giving confidence
in building on the Group’s positive revenue momentum through
2022. We remain well-positioned to mitigate the impact
of industry-wide supply chain and labour challenges, and
resulting increases in costs, that are expected to persist in
the near term.
The tragic events in Ukraine are not causing a direct impact to
our supply chain as we do not have significant exposure to the
region, however the consequences for the global economy are
uncertain at this stage. We are carefully monitoring the
situation, and our thoughts are with all those affected.
Our market-leading position in the UK continues to deliver a
robust performance, and we see meaningful growth potential
in the US where we have a strong manufacturing footprint
and strategic relationships in place. In China, with ongoing
regional restrictions, we expect COVID-19 to continue to hold
back performance. However, further diversification of our
customer base will leave us well-placed to capitalise on the
long-term growth potential within the region.
We are confident in delivering 2022 in line with market
expectations as our established teams, commercial
philosophy and dynamic ways of working equip us well for
successfully navigating the tough environment. We remain
positive about the medium-term growth opportunity, with
the Group’s strengthened balance sheet providing the
flexibility for targeted investment to support future growth,
drive efficiency and deliver returns to shareholders.
Agust Gudmundsson
Chief Executive Officer
7 March 2022
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Annual Report & Accounts 2021
STRATEGIC REPORT
1
2
3
HOW WE CREATE VALUE
OUR KEY RESOURCES OUR BUSINESS MODEL
Leverage market insight, innovation and expertise
to develop new products
Number of new products
>950
Number of UK
development chefs
39
Long-standing, strategic
customer partnerships with
in-depth understanding of
their, and consumer, needs
Market-leading insight and
innovation in own-label
fresh prepared food
Well-established and
agile supply chain
talented, diverse and
passionate colleagues
sites across the
UK, US and China
Our proven and sustainable business model is
underpinned by our customer-centric approach,
creating value for all stakeholders.
46
c.19,000
Outbound distribution of products to distribution centres and stores is
managed by our customers via in-house or third-party hauliers
of capital invested
in 2021
£55.6m
Responsibly source high-quality raw materials
and directly manage inbound supply chain
Manufacture fresh prepared food every day to the
highest standards and at scale for our customers
Number of suppliers
we source from
>900
across
>50
countries
Sites are operational
24/7
Number of food safety
professionals
c.700
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Annual Report & Accounts 2021
Our values are a set of guiding principles that unite and inspire our
colleagues and underpin our culture to support the delivery of our vision.
OUR KEY STAKEHOLDERS OUR VALUE CREATION
Skilled, engaged and progressive talent pool
Respect and
trust each other
Keep the customer
at the heart of what
we do
Get it right,
keep it right
Be proud of
what we do
Meals Pizza & Bread Salads Desserts
CUSTOMERS
SUPPLIERS
INVESTORS
COLLEAGUES
COMMUNITIES
650
colleagues enrolled on Front-Line
Leaders Development Programme
Innovative, high-quality and great-tasting fresh
prepared food that consumers love
Best-in-class and resilient operations underpinned
by operational excellence approach
Well-invested, strategically-located international
footprint to capitalise on future growth
Strong and sustainable free cash flow generation
A sustainable business with clear ESG commitments
Operating profit margin
5.4%
UK sites AA+ or A+ BRCGS rated
100%
UK
23
factories
US
5
factories
China
9
factories
Free cash flow
£91.2m
Reduction in Group GHG emissions intensity
ratio (gross tCO
2
e/ £m reported revenue)
10.0%
See Stakeholder Interaction on pages 66 to 71
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Annual Report & Accounts 2021
STRATEGIC REPORT
OUR MARKETS
How Bakkavor can lead the way
in growing the FPF market
1 Kantar 52 weeks to 26 December 2021.
The COVID-19 pandemic had a profound impact on global
shopping and consumption habits, with government restrictions
and the risk of the virus influencing consumers’ behaviour.
Demand for certain categories of FPF has been adversely
impacted due to mobility restrictions across the UK, US and
China, whilst others have benefitted from the increase in
in-home meal occasions. As restrictions have eased and the
impact of the pandemic has abated, consumers are demanding
fresher, quicker, and more inspirational meal solutions.
The range of FPF across our categories has continued to
evolve to provide innovative, great tasting products, and has
underpinned the strong performance of the FPF market
in all three regions in 2021.
The easing of COVID-19 related restrictions through the first
half of the year has supported the restoration of consumer
mobility and subsequently a return in the frequency of
shopping trips, a key driver of FPF performance. The demand
for food-to-go products, such as salads, has benefitted from
the steady move back to the office working environment and
increase in travel. In contrast, the continuation of remote
working, as well as continued consumer caution on when to
eat out due to ongoing COVID-19 and economic concerns, has
benefitted other FPF categories, such as pizza and desserts,
with an increase in the number of meal occasions in the home.
Additionally, demand for FPF has been favourable due to
consumers’ busier lives, mealtime malaise and a desire to
seek enhanced meal enjoyment at home. This has meant that
consumers are willing to pay more for an added-value experience,
and therefore driven an increase in purchases of premium and
branded products. Combined with seeing fewer promotions, this
has led to an increase in the average price across FPF products.
Ensuring we deliver against consumer needs is paramount.
These need states are growing and the importance to deliver
upon them is intensified by legislative forces and retail
targets, particularly around health and sustainability goals.
Today’s consumer is seeking to do better – for themselves,
for others and for our planet, with an ambition to:
• Eat better by enhancing health and wellbeing;
• Enjoy meals better with a more valued experience;
• Spend better, particularly elevated as we head into 2022
with rising living costs; and
• Live better, with COP26 bringing sustainability back
to the front of mind.
To meet consumers’ desire to do better, we have distilled
our insight to identify six key growth drivers. These drivers
help us to focus our efforts and identify how we can lead the
way in growing the FPF market and are used to underpin
our category and customer plans.
While they were initially developed to respond to change and
opportunity in the UK, they are generally applicable to the
US and China. We have expanded on each of the six growth
drivers and how we have responded through 2021.
THE BIG 6 DRIVERS UNDERPINNING GROWTH IN FPF
BE PARTICIPATORY BE PART OF MORE MEALS
BE EXPERIENTIAL
BE RELEVANT ALL DAY BE SUSTAINABLE
BE FRESH AND NATURAL
99%
of GB households consume
FPF products on average
62
times a year
1
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Annual Report & Accounts 2021
WHAT ARE THE DRIVERS AND HOW IS BAKKAVOR RESPONDING?
2 UK: Good Sense Research carried out for Bakkavor in March 2021. Sample size of 2,034 UK consumers, understanding health motivators in Fresh Prepared Foods.
3 US: Research from The Food Industry Association and Deloitte.
4 UK: Kantar Usage panel, 52w/e 24 January 2021 % savoury evening meal occasions by meal preparation method.
5 UK: Kantar Usage panel, 52w/e 24 January 2021 % savoury evening meal occasions by meal preparation method on a Saturday over 5 years.
Leading through a fresh
perspective of health
• Consumers’ growing ambition to eat better along with
government legislation and retailer targets are acting as a
driving force in changing attitudes towards healthy eating.
• Consumers desire fresh, natural, modern and vibrant product
ranges that create a healthy balance in meal repertoire.
• They are seeking out products that look homemade, and are
using traffic lights as a useful guide to support their judgement
on health. The historical focus on meeting health needs through
calorie control has become less important.
• Furthermore, they are looking to reduce red meat consumption,
favouring alternative proteins, increasing the vegetable content,
or using natural plant-based alternatives.
• Product trust is essential, as well as good quality and delivering
great value.
88%
of UK consumers state fresh and natural as the
most important influencer of healthy food choice
when shopping
2
Provide a more
interactive experience
• In conjunction with consumer desire to eat more fresh and
natural meals, we have seen a shift in consumers’ seeking
more involvement in meal creation.
• This trend accelerated through periods of lockdown when
consumers had more time to try new recipes and cook
more themselves.
• Whilst consumers’ desire to cook remains, we have seen a
shift and growing need for more convenient, part-prepared
products that provide fresh convenience to fit in with busier
post-pandemic lifestyles.
BE
PARTICIPATORY
Market insight: Market insight:
BE FRESH
AND NATURAL
9 in 10
retailers
3
in the US see fresh meal solutions
as an important growth segment
38%
of meal occasions are cooked from scratch or assisted
(i.e. those using partially-prepared ingredients to create
a meal), yet only 17% of FPF occasions
4
2.2%
point growth in consumer from scratch or assembly
cooking on a Saturday evening in the last 5 years
5
How we have responded
• We have launched new products that leverage our fresh food
credentials to respond to consumer needs.
• We relaunched over 60 products in a key customers salad range
to address consumers’ increasing focus on health, introduced
new products across retailer ‘balanced meals’ ranges, and
relaunched several hearty new soups, increasing ingredient
quality and enhancing the nutritional profile.
• We are preparing for the upcoming regulatory changes that will
impact high fat, salt and sugar (“HFSS”) products’ store location
and promotional dynamics from October 2022, with the primary
exposure in desserts, pizza and ready meals.
• We have made progress in reformulating several higher risk
products and continue to work with our customers to develop
the commercial mechanics and evaluate new opportunities.
• In China, we developed several health-focused products,
including overnight oat pots and purple potato puree. In the US,
we have launched a range of low-carbohydrate meals with a
strategic customer, to provide consumers with balanced,
healthy meal choices.
How we have responded
• We launched new stir-fry products, including a range to satisfy
the desire for growing Asian cuisines, with combinations such
as pak choi and butternut squash.
• As part of our strategic customer salads relaunch, we
introduced a ‘BBQ Kit Salad Bag’, an example of bringing
participatory products to the table.
• Demand for fresh and convenient meals continues to accelerate
in the US, and we have successfully rolled out a range of fresh
meals to over 500 stores for a strategic customer.
• As the FPF market under-indexes in ‘participatory’ products, we
have the opportunity to further leverage our already successful
participatory categories such as stir-fry, fresh sauces, and
salads, and enhance our offering of convenient part-prepared
ingredients to support meal preparation.
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Annual Report & Accounts 2021
STRATEGIC REPORT
OUR MARKETS
CONTINUED
Providing fresh, tasty meal
components
• The majority of meals made at home are created from easy to
assemble parts, such as sausage and mash, chicken and salad.
• Consumers are moving away from ‘quick’ and instead looking for
solutions that are ‘easy’, reflected in the popularity of assembled
meals particularly amongst families.
• Consumers’ desire for ease, value, inspiration, and freshness
can be met through versatile fridge-fillers and components
that complement the main meal, such as dips, dressed salads,
chilled breads and modern deli products, in formats relevant
for multiple meals and occasions.
• While FPF currently under-indexes in assembled meals, the
range of products can provide easy, convenient solutions and
provides an opportunity for growth.
BE PART OF
MORE MEALS
Take consumers on an exciting
culinary adventure
• Delivering taste and enjoyment is the ultimate consumer
need to target.
• Consumers are looking for an enhanced experience when
they shop, cook and eat; searching for inspiration, food
adventure, shared moments, elevated experiences and a
touch of indulgence.
• Consumers are prepared to pay more for an experience,
particularly willing to treat themselves at the weekend,
supporting growth in premium tier and branded products.
• Products need to deliver quality, taste and inspiration to
enable consumers to connect with and enjoy their food.
BE
EXPERIENTIAL
6 UK: Kantar Usage panel, 52w/e 24 January 2021 % savoury evening meal occasions by meal preparation method.
7 UK: Kantar Usage panel 4w/e 24 January 2021 % total food and drink servings, in home, carried out driven by motivators of enjoyment, practicality and health.
8 UK: Kantar Usage panel for 52 w/e 24 January 2021. Saturday evening meals vs. weekday evening meals, difference in av. £ per occasions, in home & carried out occasions.
51%
of evening meals are assembled, the most
popular method of making meals
6
Market insight:
79%
of food and drink choices are motivated
by the desire for meal enjoyment
7
Market insight:
7%
is the share of assembled meals for FPF
and provides an opportunity for growth
by providing easy meal assembly solutions
6
Consumers pay
17%
more on average for a Saturday evening
meal compared to one during the week
8
How we have responded
• We have continued to enhance consumers’ mealtimes through
easy meal-makers, including an indulgent truffle mash and
providing pizza accompaniments such as a pizza dip stacker.
• We have also evolved our range of desserts to include more
premium products and in multiple formats, such as our
individually portioned cheesecake slices for enhanced versatility.
• Our range of focaccias and topped artisan bread in the US is
increasingly part of more meals, consumed as accompaniments in
a larger meal, or as a solution for convenience-seeking consumers.
• Dips also continue to be used as a key component across a
variety of meals, from fresh and protein-rich salads to being
part of Mediterranean style sharing plates.
How we have responded
• We launched over 950 products in 2021, providing consumers
with high-quality, great-tasting products, and a constant stream
of exciting product innovation to enhance their experience.
• We have continued to innovate in desserts, with the launch of
variations on our popular yumnuts, an indulgent premium éclair
and a delicious Basque cheesecake.
• We also launched two of our own brands: Haydens Bakery and
The Delicious Dessert Company, with our range of eclairs now
in over 900 stores with two strategic customers.
• We have created meal propositions that bring restaurant meals
to the home by leveraging our multi-category capability to add a
range of Italian ready meals, bread and desserts to our existing
Pizza Express offer, along with the launch of new Asian and
oriental-inspired ready meals.
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Bakkavor Group plc
Annual Report & Accounts 2021
9 UK: Kantar usage panel for 52 w/e 24 January 2021 % Occasion Spend by day part (excluding breakfast), in home & carried out.
10 China: https://www.statista.com/outlook/cmo/food/convenience-food/ready-to-eat-meals/china.
11 UK: IGD ShopperVista survey of 2,062 consumers in October 2021.
12 UK: OnePulse survey of 500 respondents carried out by Bakkavor in October 2021.
Broadening our presence across
daytime occasions
• Meal occasions in the home increased through 2020 and 2021
as a result of COVID-19 government restrictions.
• As these restrictions have eased, the demand for out of home,
on the move occasions has started to rebound. However,
consumers expect to maintain a degree of hybrid working going
forward and therefore demand for daytime in-home meal
occasions remains strong.
• Consumers desire products that are fit-for-purpose for both
in-home and out-of-home daytime consumption.
• They are seeking products that provide inspiration to elevate
their experience in the relevant format and are versatile to
reflect their different meal preparation needs.
• Positive health, ease and filling are all more important to a
‘working from home’ lunch than they were pre-COVID-19,
with treating and speed deprioritised.
BE RELEVANT
ALL DAY
Acting now for a more
sustainable future
• There is a heightened need for businesses, governmental
bodies, and individuals to act now to ensure a more
sustainable future.
• Our customers have set ambitious sustainability-linked targets
to have a positive impact and help meet consumers’ increasing
desire to live better.
• Consumers are seeking transparency and trust, and are
looking for, and switching to, products and brands with
sustainable credentials.
• Consumers are increasingly adopting a flexitarian approach
to their diet, reducing reliance on red meat and trying new
alternative proteins. They have a heightened focus on reducing
food waste, which fulfils ethical concerns as well as bringing
budgetary benefits.
BE
SUSTAINABLE
Market insight:
16%
of shoppers now follow a vegan, vegetarian,
or flexitarian diet per IGD ShopperVista
11
Market insight:
57%
of meal occasions across the market are lunch and snacking,
but only 32% of FPF occasions, highlighting the opportunity
to grow day part occasions
9
33%
year-on-year increase in appetite for pre-packed
fresh convenience foods in China
10
34%
of consumers surveyed
12
stated they will
look to make more sustainable product
purchases in the future
How we have responded
• We have continued to elevate our UK range of food-on-the-move
salads and wraps. We launched several speciality salads for a
strategic customer, including a bang bang chicken salad, which
provided consumers with inspiring and vibrant ranges of products.
• We have supported one of our strategic customers with a range
of products developed to target the lunchtime occasion, including
salads and a hot-eating offer of topped pizza flatbreads.
• In the US, our range of burritos is consumed throughout the day,
as a hearty breakfast, an on-the-move lunch, or a convenient
dinner. We have continued to bring excitement to the category
with alternative fillings such as chicken asada and turkey mole.
• Expanding beyond the lunchtime offer, in China, we have
worked with a large coffee chain to supply breakfast
sandwiches nationally, as part of a new meal deal range.
How we have responded
• We have introduced a number of initiatives to act sustainably
for our future across food waste, packaging, and emissions.
See more in Trusted Partner on pages 34 to 53.
• Vegetarian products comprise 50% of our UK product portfolio
and almost one in five of our products are vegan or plant-based.
• We have supported our customers in the delivery of their
sustainability targets, including a 25% reduction in plastic
used in an Italian ready meal tray to support a key customer’s
packaging initiatives.
• We have increased the use of alternative proteins in our products
that are part of our strategic customers’ plant-based ranges.
• In China, we have supported the shift towards more sustainable
food and collaborated with two plant-based specialists to include
their branded meat substitutes in several new products for our
foodservice and retail customers.
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Annual Report & Accounts 2021
STRATEGIC REPORT
OUR VISION, PURPOSE AND VALUES
RESPECT AND
TRUST EACH OTHER
Our vision
To lead the way in bringing innovative,
great-tasting, freshly prepared food
to people around the world.
Living our values
every day
• Treat each other fairly and
include everyone – we’re
all on the same side.
• Care for and support each
other to achieve our goals.
• Build confidence and have
trust in one another.
• Listen to each other and
recognise everyone’s
contribution – we can all
make a difference.
Our values
Our refreshed values
focus on working together,
being open and honest
with each other and
ensuring that we treat all
colleagues the same.
We ask our colleagues for honest feedback
about our values and what it’s like to work
for Bakkavor through our Employee
Engagement Survey (“EES”). The feedback
directly influences our ways of working
and how we create a great place to work.
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Annual Report & Accounts 2021
KEEP THE CUSTOMER
AT THE HEART
OF WHAT WE DO
GET IT RIGHT,
KEEP IT RIGHT
BE PROUD OF
WHAT WE DO
• Always value and protect our
customer partnerships.
• Maintain our commitment
to the highest standards
of food safety, integrity
and quality.
• Innovate to help customers
stay ahead.
• Stay agile and work together
with our customers to
anticipate future needs.
• Uphold our standards and
be consistent every day.
• Stay safe and look after
ourselves and each other.
• Take responsibility for the
impact of our actions on
the environment and in
our communities.
• Be fit for the future – learn
from our mistakes and invest
in our skills.
• Aim high, value our
efforts and always go
the extra mile.
• Be positive, celebrate
and share our successes.
• Inspire others to work with
passion and enthusiasm.
• Look for ways to improve
the way we work.
Our purpose
To delight our customers and consumers through
the fresh, convenient, innovative and great-tasting
food that we proudly create every day.
Agust Gudmundsson
Chief Executive Officer
Our values are the foundation of our culture. They guide our
behaviours and reflect who we are today and aspire to be
tomorrow. Our refreshed values are warmer, more personal
and more people focused. We must all now create the environment to
embed these values into the business and deliver consistent change.
17
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Annual Report & Accounts 2021
STRATEGIC REPORT
OUR COLLEAGUES
Proud to be
Bakkavor
Donna-Maria Lee
Chief People Officer
Our diverse, skilled
and innovative c.19,000
colleagues, from over 90
countries, are committed to delivering
great-tasting freshly prepared food
for our customers globally. This is a
testament to why we are a trusted
partner to our customers, suppliers
and wider communities. We are
Bakkavor and proud of what we do.
83%
response rate to our most recent
Employee Engagement Survey
WHAT OUR COLLEAGUES ARE TELLING US
OUR COLLEAGUES TAKE PRIDE IN
THE KNOWLEDGE THAT:
• They know what we ask of them.
• They have the authority to do their jobs well.
• They understand how they contribute to the
bigger picture.
• They are passionate about food safety.
• We look after their safety at work.
• The customers’ needs are at the heart of what
we do – making high-quality products.
WE ARE COMMITTED TO:
• Recognising everyone’s contribution to the business.
• Improving our communication and collaboration.
• Providing more learning and development
opportunities supported by regular feedback.
• Supporting colleagues’ wellbeing.
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Annual Report & Accounts 2021
18
OUR APPROACH
Employer brand
Creating a compelling
employer brand experience for
current and future colleagues
Engaged employees
Growing our culture to harness
our colleagues’ desire to make a
difference, and to feel worthwhile
and included at Bakkavor
Colleague empowerment
Providing our colleagues with
self-service tools to manage
HR day-to-day requests and
lead and engage teams
OUR ACHIEVEMENTS IN 2021
Increased rates of pay and provided
new benefits
• Implemented a discretionary, out-of-
cycle pay increase for the majority
of our factory-based colleagues.
• This was a significant investment in
our colleagues, and recognises the
importance of maintaining high levels
of morale and colleague retention.
• Worked hard to make sure the quality
and breadth of our colleagues’
benefits package remains competitive
and attractive.
• Announced two new benefits for all
colleagues: free independent mortgage
advice, and a 10% discount on GoStudent
home tutoring.
Colleagues’ voice well-represented
at the Group Board
• Appointed Jill Caseberry as the
company’s designated workforce
engagement Non-executive Director.
• Jill attended engagement sessions
with Bakkavor’s Site Employee Forums
(“SEF”) and Group Employee Forum
(“GEF”), and feedback was provided to
the Group Board.
• Workforce engagement initiatives were
communicated to colleagues via our
colleague magazine and colleagues
were invited to email Jill with their
ideas for increasing engagement with
or among colleagues.
Enhanced our wellbeing support
• Instigated a cross-functional steering
group in the first quarter of 2021
aimed at supporting our colleagues
emotionally, physically and financially.
• Encouraged colleagues to utilise
resources provided by our enhanced
wellbeing toolkit, including support
mechanisms such as our Employee
Assistance Programme and promoting
financial support through our Group
charity partner, GroceryAid’s, helpline.
• Wellbeing campaigns launched include:
supporting Mental Health Awareness
Week; increasing awareness of the
dangers of high blood pressure during
September’s Know Your Numbers week;
sharing NHS advice around protecting
your back during Back Care Awareness
Week; and offering all UK colleagues
free flu jabs.
Invested to improve site facilities
• Invested in new staff shops at our Meals
Sutton Bridge and Desserts Devizes
sites, a new canteen at our Bread Barton
site, a state-of-the-art learning hub at
our Meals London Elveden site and a
new outdoor seating area at our Salads
Bourne site.
Our approach is integrated with the ‘Engagement and Wellbeing’ element of our Trusted Partner strategy, see pages 45 to 48.
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Annual Report & Accounts 2021
STRATEGIC REPORT
Donna-Maria Lee
Chief People Officer
Our aim is to provide
our colleagues with
an environment where
they feel valued, included
and inspired to perform at
their best. We have made good
progress during 2021, but
we must strive to do better.
Significant investment in two new
development programmes
• Enrolled more than 650 factory-based colleagues
on our new Front-Line Leaders Development
Programme, designed to give them the skills they
need to do their job to the best of their ability.
• Positive feedback received to date from colleagues
that they were delighted to be engaged and excited
to put their learnings into practice.
• Launched an Executive Leadership Development
Programme for over 20 leaders across the Group.
650
factory-based colleagues on
our new Front-Line Leaders
Development Programme
Launched our Inclusion & Diversity (“I&D”)
Forum and celebrated several initiatives
• Launched our I&D Forum – a steering group of
representatives from across the business, who are
committed to shaping and advocating our inclusion
and diversity agenda.
• Colleagues shared their personal commitments
to drive inclusion and equality as part of our
International Women’s Day campaign. We marked
National Inclusion Week by launching our own I&D
Learning Hub, which focused on driving behaviours
that promote a culture of inclusion, respect and
care. Additionally, it highlights the strength that
cultural diversity brings to our workforce. We
encouraged colleagues to wear their national dress
to work and share recipes from their culture on
World Day for Cultural Diversity.
• We acted as headline sponsor and partner of the
Diversity and Inclusion in Grocery Programme, that
aims to bring together FMCG businesses in order
to deliver change.
OUR COLLEAGUES
CONTINUED
Progressing our Group HR transformation
• Investment to integrate all HR systems into one
platform, SuccessFactors, has continued to
progress well through the year.
• SuccessFactors will allow colleagues easy mobile
access to the information they need, supporting
their empowerment. It will also bring standardised
and streamlined HR processes across the business.
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Bakkavor Group plc
Annual Report & Accounts 2021
Recognised our colleagues through our
‘Proud to Be’ awards
• Responded to feedback from our Employee
Engagement Survey, which highlighted that
colleague recognition was an area where we
had an opportunity to improve, by creating the
Celebrating ‘Proud to Be’ Bakkavor Awards.
• This different take on our Innovation Awards was
designed to recognise the exceptional nature of the
last 18 months and show our appreciation to the
colleagues and teams who delivered the innovation
and change that have enabled us to adapt to the
challenges the business has faced in this period,
including changing customer and consumer
demand, heightened health and safety regulations
and new ways of working.
• Received 80 diverse submissions, covering a wide
range of achievements including in product
innovation, excellence in operational delivery
and wellbeing initiatives.
Enhanced our recruitment and onboarding
experience for new colleagues
• Improved our recruitment experience for UK
factory colleagues by reducing average time
from application to hire by eight days.
• Introduced new onboarding programme at our
UK sites to improve staff retention and give new
colleagues the best possible introduction to
working at Bakkavor.
• Our site HR and management teams receive
access to an online toolkit, which contains helpful
documents and best-practice guidelines. It also
encourages our sites to introduce a New Starter
Champion to support new colleagues during their
first few weeks at Bakkavor.
We are extremely excited about our colleague
agenda in 2022. Our four priorities are:
• Developing our employer brand: We will continue
to implement our Company-wide approach to
align our recognition processes, expand our
learning and development programme and seek
to onboard colleagues more effectively.
• Enhancing our colleague engagement: We will
seek to raise awareness and further embed
inclusive behaviours that represent our evolved
values. We will recognise loyal and innovative
colleagues through our UK Loyal Service Awards
whilst building their skills through the further
roll-out of mentoring and front-line leadership
initiatives. We will also continue to improve our
digital communications across the Group.
• Promoting colleague wellbeing in our workplace
and communities: We will continue with the
roll-out of our fast-track physio service that
helps colleagues with musculoskeletal health
conditions, develop a network of Health
and Wellbeing Champions and introduce a
suite of wellbeing training content.
• Further empowering our colleagues:
We will continue to progress our Group HR
transformation, with SuccessFactors, due to go
live in the first quarter of 2022. This will help
drive productivity and empowerment by enabling
colleagues to access self-service tools.
OUR PRIORITIES FOR
2022 AND BEYOND
See Trusted Partner – Engagement and Wellbeing on pages 45 to 48
21
STRATEGIC REPORT
Bakkavor Group plc
Annual Report & Accounts 2021
1 2
3
4
OUR GROUP STRATEGY
Delivering profitable
& sustainable growth
THROUGH OUR STRATEGIC ELEMENTS
UK
Drive returns by leveraging
our #1 market position
INTERNATIONAL
Accelerate profitable growth
in the US and China
EXCELLENCE
Deliver superior performance through operational excellence
TRUST
Be a trusted partner for our colleagues, customers, suppliers and wider communities
Our approach is captured in our Trusted Partner ESG strategy, which defines our actions on the issues that matter most
to our stakeholders across our supply chain, our own operations and in our workplaces and communities.
Realising our vision to lead the way in bringing innovative, great-tasting,
freshly prepared food to people around the world.
We leverage our expertise and scale to create fresh, delicious and
great-value products that people love to eat, and in the process
generate profitable and sustainable growth.
Sebastiano Macchi
Group Strategy Director
See Trusted Partner on pages 34 to 53
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Bakkavor Group plc
Annual Report & Accounts 2021
1
OUR KEY DRIVERS
• Capitalise on our market insights, innovation
capabilities and breadth of offer to develop
products and propositions that delight our
customers and consumers.
• Maximise the benefit of our scale to develop,
prepare and distribute our products with a more
efficient and sustainable use of resources.
OUR SCALE
One of our strategic customers sought to review its supplier base across multiple fresh prepared food categories. Our customer-
dedicated commercial team leveraged our matrix structure to mobilise resources across 15 UK sites that covered all categories in
scope, including areas that we were not yet supplying. The scale and breadth of expertise in our UK business allowed us to deliver
a comprehensive proposal that won new business across two categories whilst retaining all our existing supply.
• Pursue and capitalise on profitable growth
opportunities that allow us to create value
for our shareholders, whilst also reinvesting
in our colleagues’ skills and competencies.
UK: DRIVE RETURNS BY LEVERAGING OUR
NUMBER ONE MARKET POSITION
Our strategy in the UK is to leverage our number one position in the fresh prepared food market
to drive financial returns for the benefit of all of our stakeholders.
Our strong
performance is
testament to the
robust foundations we have
laid down; scale, category
leadership and strong
customer relationships,
as well as our acute focus
on driving efficiency and
a tight control of costs.
4x
Bakkavor’s share in the UK fresh
prepared food market is almost four
times that of the second largest player
Mike Edwards
Chief Operating Officer, UK
WHAT WE HAVE ACHIEVED
• Rebalanced our portfolio towards product
categories with higher growth or margin where
we hold a stronger competitive advantage.
• Leveraged the breadth and depth of our
product development capabilities and
our proprietary consumer insights to
successfully launch new brands and
propositions in our categories, such as
The Delicious Dessert Company and
Pizza Express’s expanded range.
• Minimised the impact of supply chain
disruptions during the COVID-19 pandemic
by retaining an agile decision-making
process and collaborating more closely
with our customers and suppliers.
• Reviewed our operational processes
following the UK’s exit from the EU, including
investment in capabilities, information
systems, inventory, centralisation of ordering
and workforce review.
FUTURE FOCUS
• Targeted investment in new production
capacity to accommodate growth in
demand in certain areas, such as bread
and plant-based products.
• Create centres of excellence for specific
manufacturing processes or product
groups to drive innovation and efficiency
across our sites.
• Continue adapting our processes and
operations to prepare for, and mitigate the
impact of, any further supply chain disruption,
labour scarcity, input inflation and Brexit
impact through the year.
• Explore inorganic growth opportunities
within the fresh prepared food market to
broaden our capabilities and bolster our
proposition to customers.
STRATEGY IN ACTION
23
Bakkavor Group plc
Annual Report & Accounts 2021
STRATEGIC REPORT
2
OUR GROUP STRATEGY
CONTINUED
OUR KEY DRIVERS
• Invest in new capacity, manufacturing
capability, knowledge and skills to expand
our offering and meet the needs and
increased demand from our customers.
• Broaden and strengthen our existing customer
partnerships and develop new ones with
customers that are committed to expanding
their fresh food offer.
OUR SCALE
US
Delivered exceptional growth in the ready meals category by rolling out our offer at one customer across its entire 500-store network,
launching a new retailer-branded offer at another retailer, and broadening our range with another two customers.
CHINA
In Hong Kong, centralised the in-store bakery operations for a strategic customer into our premises, improving the product quality and
baking efficiency and ultimately leading to 30% growth in our customer’s bakery sales.
• Leverage our Group expertise and combine
this with deep local knowledge to develop
on-trend products, tailored to local tastes
and under the highest safety standards.
In the US we continued
to deliver strong
top-line growth and
invested to increase our
capacity, whilst mitigating
the impact of industry-wide
challenges. We are well
placed to take advantage
of the significant growth
potential in the US market.
48%
Our US ready meals sales
increased by 48% in 2021
Pete Laport
Chief Executive Officer, US
WHAT WE HAVE ACHIEVED
US
• Delivered remarkable growth in the ready
meals category on the back of successful
range reviews with our existing customers
and a new national supply contract with a
major retailer.
• Reacted at pace to supply chain disruptions
and labour shortages to maintain high
service levels and continuity of supply to
our customers.
• Continued to invest in our leadership team
to support the growth of the business in the
years to come.
CHINA
• Leveraged our national footprint to support
our customers’ growth plans, including from
our recently opened Wuhan production site.
• Delivered good growth in our Bakery and
Hong Kong businesses and returned both
to profitability following new business wins,
performance improvement actions and
more favourable market conditions.
• Expanded our reach into grocery retail
and grew our presence in the office
catering channel through market-leading
product innovation.
FUTURE FOCUS
US
• Invest in our existing sites to maximise
capacity and ensure we maintain the highest
technical standards, as well as maximising
operational performance.
• Develop a plan to deploy new capacity and
expand our footprint, ensuring continued
growth as our current sites reach full
capacity over the coming years.
• Provide market-leading innovation to our
customers through a consistent stream of
new products that respond to and anticipate
consumer desires.
CHINA
• Continue to grow sales with current and
new customers by leveraging our national
footprint, innovative product portfolio
and market-leading technical standards.
• Drive margin improvement through
operational leverage, development of our
product portfolio and operational excellence.
• Develop and implement a plan to retain and
attract key talent, ensuring our leadership
team has the capacity and capabilities to
deliver on our ambitions for the market.
INTERNATIONAL: ACCELERATE PROFITABLE GROWTH
IN THE US AND CHINA
We have a strong and growing presence in the two largest food markets in the world, the US and China,
where the Group has operated for over 10 years. We leverage our UK expertise to support our local
teams and continue to deliver profitable growth.
STRATEGY IN ACTION
24
Bakkavor Group plc
Annual Report & Accounts 2021
3
OUR KEY DRIVERS
• Identify and deliver efficiency improvement
opportunities across the Group through the
deployment of our dedicated and highly-
skilled operational excellence team.
• Enhance productivity through a combination
of automation investments and colleague
training, with a particular focus on
engineering skills.
OUR SCALE
• Uphold the highest of food safety and health
and safety standards in our operations for the
benefit of our colleagues and the consumers
of our products.
• Establish a resilient and efficient global
sourcing platform through our dedicated
teams in the UK, Spain and China.
• Maintain our market-leading service levels
through timely and accurate deliveries.
Whilst facing
significant challenges
in the year, we have
worked hard to ensure our
operational delivery remained
strong. We have increased
resource in our operational
excellence team and have a
strong pipeline of projects to
drive further improvement.
£12m
investment in our new automated
manufacturing system to
increase productivity across
our UK production sites
WHAT WE HAVE ACHIEVED
• Implemented various process improvement
initiatives and productivity investments
across our sites globally. This included
redeploying equipment across our UK sites,
centralising procurement, installing new
automation solutions and increasing our
colleague training efforts.
• Continued the roll-out of a new automated
smart manufacturing system across our
UK sites to highlight opportunities for
efficiency gains.
• Provided best-in-class service levels
to our UK customers despite challenges
with availability of labour and supply
chain disruption.
• Maintained industry-leading technical
standards across the Group in health
and safety and food safety.
FUTURE FOCUS
• Drive manufacturing efficiencies through
automation, data-driven control of materials
and labour, improved training programmes
and ad-hoc external support.
• Deliver engineering excellence in the UK
through our new apprenticeship programme
and better sharing of best practices through
the work of our Operational Excellence team.
• Invest in people development and upskilling to
drive performance and improve retention and
its associated costs and loss of know-how.
• Maintain or further improve our technical
standards, across health and safety and food
safety, through colleague training, targeted
site investments, and sharing of best
practices across the Group.
Kuldip Bains
Head of Operational Finance
In 2021, the UK Operational Excellence team trialled a portable multi-head weighing machine across several factories. Such automated
weighers allow the distribution of food components across products with high speed and accuracy, leading to higher throughput,
improved product consistency, lower material waste and labour cost savings. The trials allowed the team to de-risk the investment by
understanding the benefit of the technology across a variety of use cases before committing to purchase permanent and customised
versions of the machine.
STRATEGY IN ACTION
EXCELLENCE: DELIVER SUPERIOR PERFORMANCE THROUGH
OPERATIONAL EXCELLENCE
Bakkavor continues to invest in its colleagues and assets to generate operational efficiencies
and maintain the highest technical standards and service levels.
25
Bakkavor Group plc
Annual Report & Accounts 2021
STRATEGIC REPORT
2019
2020
2021 £1,885.6m
£1,775.1m
£1,862.9m
2019
2020
2021 £102.0m
£83.6m
£89.7m
2019
2020
2021
£91.2m
£40.1m
£46.9m
1 2 3 1 2 1 2 3
KEY PERFORMANCE INDICATORS
We measure our progress through a number of financial
and non-financial performance measures of which adjusted
operating profit, UK employee turnover and adjusted EPS
form the basis of our colleague incentive plans.
FINANCIAL
KPIS
What are we
measuring?
Why is it
important?
How did we
perform?
What are the
key associated
principal risks?
Link to Group Strategy
Like-for-like
revenue
1
£1,885.6m
Revenue growth at a constant currency
excluding acquisitions and closed and
sold businesses.
The Group uses like-for-like revenue
because it allows for a more meaningful
comparison of revenue trends from
period to period.
This increase was primarily due to the
recovery in volumes as COVID-19
restrictions were eased during the period
and is against a weaker comparative due
to the impact of the pandemic on 2020
sales. In addition, the US business
benefitted from growth with both new and
existing customers in the traditional
grocery retail and online channels and
China volumes have recovered steadily.
Reliance on a small number of key
customers, Brexit, COVID-19 disruption,
consumer behaviour and demand, disruption
to Group operations and competitors.
All of these risks could impact the
Group’s ability to achieve further
revenue growth.
Link to Group Strategy
Adjusted operating
profit
1,2
£102.0m
The profit performance of the business
based on operating profit excluding
restructuring costs, asset impairments
and those additional charges or credits
that are considered significant or one-off
in nature.
The Group manages the performance
of its businesses through the use of
adjusted operating profit as this measure
excludes the impact of items that hinder
comparison of profitability year-on-year.
Profitability improved across all three
regions, reflecting the ramp up of the
business following the easing of COVID-19
restrictions and the return in consumer
demand, and we have largely been able
to mitigate the impact of inflationary
headwinds and industry-wide disruption.
Raw material and input cost inflation,
labour availability and cost, Brexit,
COVID-19 disruption, disruption to Group
operations, consumer behaviour and
demand and competitors.
All of these risks could impact the
Group’s ability to achieve further
profit growth.
Link to Group Strategy
Free cash flow
1
£91.2m
This is defined as the amount of cash
generated by the Group after meeting
all of its obligations for interest, tax
and pensions and after purchases
of property, plant and equipment
(excluding development projects), but
before payments of refinancing fees
and other exceptional or significant
non-recurring cash flows.
The Group views free cash flow as a
key liquidity measure as it indicates
the underlying cash available to pay
dividends, repay debt or make further
investments in the Group.
The improvement is largely due to working
capital improvements combined with the
increase in operating profit for the year.
In addition, tax paid has decreased by
£10.0 million following higher payments
in 2020. This was due to changes to UK
legislation that required the estimated tax
due for a financial year to be paid within
that period and the cash benefit from the
UK corporate tax super-deduction on
investments since April 2021.
Raw material and input-cost inflation,
labour availability and cost, Brexit,
COVID-19 disruption, disruption to
Group operations, consumer behaviour
and demand and competitors.
All of these risks could impact the
Group’s ability to generate further
cash flows.
1 Alternative Performance Measures (“APMs”), including ‘like-for-like’, ‘adjusted’ and ‘underlying’, are applied consistently throughout the Annual Report and Accounts.
The APMs are defined in full and reconciled to the reported statutory numbers in Note 36 of the Notes to the Consolidated Financial Statements.
+6.2%
Improved
Performance
Worsened
+£51.1m+22.0%
26
Bakkavor Group plc
Annual Report & Accounts 2021
1
2 3
2019
2020
2021
10.4p
8.7p
10.3p
2019
2020
2021
1.9x
2.3x
2.3x
2019
2020
2021
7.2%
6.6%
8.0%
1 2 31 2 3
4
1 2 3
See Directors’ Remuneration Report on pages 120 to 141
UK: Drive returns by
leveraging our UK
#1 market position
Link to the strategic elements of our Group Strategy
International: Accelerate
profitable growth in US
and China
Excellence: Deliver
superior performance
through operational
excellence
Link to Group Strategy
Return on invested capital
(“ROIC”)
1
7.2%
This is calculated as adjusted operating profit
after tax divided by the average invested capital
for a rolling 52-week period to determine how
effective the business is in generating returns
from its asset base.
ROIC is considered to be a useful indicator
of the amount returned as a percentage of
shareholders’ invested capital and can help
analysts, investors and stakeholders to evaluate
the Group’s profitability and the efficiency with
which its invested capital is employed.
The Group’s ROIC increased by 60 basis points
to 7.2% for 2021 due to the improved profitability
across the Group combined with benefits of
recent capital investments being realised,
particularly in the US.
Raw material and input-cost inflation, labour
availability and cost, Brexit, COVID-19 disruption,
disruption to Group operations, consumer
behaviour and demand and competitors.
All of these risks could impact the Group’s
ability to achieve further profit growth.
Link to Group Strategy
Adjusted earnings
per share
1
10.4p
The Group’s underlying earnings calculated
by dividing adjusted earnings by the weighted
average number of Ordinary shares in issue
during the year. Adjusted earnings is calculated
as profit attributable to equity holders of the
Company adjusted to exclude exceptional items
and the change in fair value of derivative
financial instruments.
The Group uses this measure as it tracks the
underlying profitability of the Group and enables
comparison with the Group’s peer companies.
Adjusted earnings per share increased by
1.7 pence to 10.4 pence in 2021 from 8.7 pence
in 2020 which reflects the improvement in
underlying trading in the period.
Raw material and input-cost inflation, labour
availability and cost, Brexit, COVID-19 disruption,
disruption to Group operations, consumer
behaviour and demand and competitors.
All of these risks could impact the Group’s ability
to achieve further earnings growth.
Link to Group Strategy
Leverage ratio (net debt /
adjusted EBITDA pre IFRS 16
1
)
1.9x
The leverage ratio indicates the level of debt
held by the Group. This is calculated by dividing
operational net debt by adjusted EBITDA pre
IFRS 16. Operational net debt excludes the
impact of non-cash items and those liabilities
recognised under IFRS 16 on the Group’s
statutory net debt and is comparable with the
Group’s free cash flow measure.
The leverage ratio must be below the maximum
defined in the Group’s bank debt facilities to
ensure the facilities remain available as needed
and also determines the interest margin payable
on debt drawn.
As a result of improved trading and a £39.7m
reduction in operating net debt in 2021, the
leverage ratio is now 1.9x and within our
medium-term target range of 1.5x to 2.0x.
Treasury and pensions, strategic growth and
change programmes.
These risks could impact the Group’s ability to
provide finance to achieve further business
growth if the Group does not comply with the
terms of its financing arrangements.
See Risk Management and Risks on pages 72 to 87
2 The Group’s bonus scheme and long-term incentive awards are based on performance across a selection of three KPIs. See pages 126-127 in the Remuneration Report.
Trust: Be a trusted partner for
our colleagues, customers,
suppliers and wider communities
See Financial Review on pages 62 to 65
+1.7p +60bps-0.4x
27
Bakkavor Group plc
Annual Report & Accounts 2021
STRATEGIC REPORT
2019
2020
2021
334
330
254
2019
2020
2021
27.8%
17.9%
20.9%
1 3 4 1 3 4
Improved
Performance
Worsened
KEY PERFORMANCE INDICATORS
CONTINUED
What are we
measuring?
Why is it
important?
How did we
perform?
What are the
key associated
principal risks?
Link to Group Strategy
UK accidents resulting in lost time >7 days
(per 100k UK employees)
334
The number of accidents that took place across our UK sites
that resulted in affected colleagues taking more than seven
days off work. It is calculated based on 100k colleagues to
enable us to compare our performance to the latest data
from the UK Health and Safety Executive (“HSE”).
We have a duty of care to colleagues in ensuring their
health, safety and wellbeing. Our health and safety culture
is based on a governance process driven by the Group
Board and we have health and safety teams in place that
define standards and monitor compliance with systems.
Our rate of accidents that resulted in lost time of over seven
days per 100k colleagues increased by 1.2% marginally
compared to 2020. However, the absolute number of
accidents reduced by 1. Slips and trips remain the single
highest cause of accidents and we introduced a new
standard of anti-slip wellington boots that are targeted to
the needs of each site. We also introduced an increased
standard of anti-slip factory flooring to improve the
resistance to slips.
Bakkavor continues to outperform the HSE Food Industry
average (762 >7 day accidents per 100k employees) by 56%.
Further information can be found on page 50.
Health and safety.
As part of our drive towards an accident prevention culture
we continue to focus on minimising risk associated with
workplace transport, machinery safety, electrical safety,
as well as boiler and fire safety.
NON-
FINANCIAL
KPIS
Link to Group Strategy
UK employee turnover
1
27.8%
This is calculated by dividing the number of colleagues
leaving the business (excluding fixed-term contracts and
redundancies) against total headcount.
Our colleagues are our top priority and we must remain
focused on being the local employer of choice for both
existing and new talent. We recognise the importance of
attracting and retaining a skilled and diverse workforce.
Driving an improvement in employee turnover also creates
efficiency by decreasing the amount of recruitment and
induction activities required.
In 2021, UK employee turnover increased substantially, reversing
a positive trend seen in previous years. This is driven by an
industry-wide increase in demand for labour, and consequentially
an increase in pay rates, as the economy has recovered from the
pandemic through 2021. The labour pool tightened as a result of
Brexit and some of our non-UK colleagues returned to their home
country during the pandemic and have not returned. We have
implemented several initiatives to increase our recruitment and
retention to help mitigate the high levels of vacancies and
employee turnover. In 2021 we implemented an out-of-cycle pay
increase to the majority of UK factory colleagues and provided
additional benefits including free transport, referral bonuses,
increasing flexibility in working patterns and upgraded site
facilities. We have also invested in developing our talent, with
two training programmes launched.
Availability, recruitment and retention of colleagues.
Being able to retain skilled and committed colleagues
is critical to delivering our strategic growth objectives.
1 The Group’s bonus scheme and long-term incentive awards are based on performance across a selection of three KPIs. See pages 126-127 in the Remuneration Report.
2 FAO (2014) Food waste footprint. Full cost accounting (available at www.fao.org/3/a-i3991e.pdf).
3 Vermeulen, S. J., Campbell B.M., Ingram, J.S.I. (2012) Climate Change and Food Systems. Annual Review of Environment and Resources, 37, 195-222.
+1.2% +990bps
28
Bakkavor Group plc
Annual Report & Accounts 2021
2019
2020
2021
135,691
141,538
138,476
2019
2020
2021 9.15%
8.48%
8.90%
1 3 41 2 4
Link to Group Strategy
Total Group net carbon emissions
(tCO
2
e)
135,691
Scope 1 and 2 net (market-based) emissions across the Group.
Climate change is a significant issue facing society and the
Group. This is why we have made the commitment to reach
Net Zero emissions across our Group operations by 2040.
We recognise we have a responsibility to mitigate our direct and
indirect impacts on climate change. Our primary focus is on
driving energy efficiency in our manufacturing operations.
The majority of our carbon emissions arise from the energy
required for our factory sites’ heating and cooling systems.
Net (market-based) carbon emissions in the Group decreased
by 4.1% in 2021, despite increased production volumes,
driven by energy efficiency measures introduced in our UK
operations. Group gross (location-based) emissions (that is,
not including emissions avoided through our purchase of
green electricity in the UK) also decreased by 6.1% and our
Group intensity ratio (gross emissions per £m reported
revenue) decreased by 10.0% to 92.6 tCO
2
e as a result of
increased operating efficiency.
In the UK, total net (location-based) emissions reduced by
15.0% compared to 2020, a reduction of 13,511 tCO
2
e. The
UK’s intensity ratio also decreased by 15.6% to 71.8 tCO
2
e/£m
reported revenue versus 2020.
Historical emissions going back to 2018 have been restated
(refer to data on pages 60 to 61.
‘Climate change and sustainability’.
In 2021, we conducted a climate risk assessment of our
business including scenario analysis. More detail on our
climate change response can be found in the TCFD section
on pages 54 to 61.
Link to Group Strategy
UK food waste
(tonnes)
9.15%
Food waste as per the Food Loss and Waste Accounting
and Reporting Standard (“FLW Standard”). Percentage
food waste calculated as ‘tonnes food waste divided by
tonnes (food product produced or sold as intended plus
food waste plus food sent to other destinations)’.
Approximately one third of all food produced is wasted or
lost across the value chain
2
. As global food systems are
responsible for approximately 30% of greenhouse gas
emissions
3
,
tackling food waste is one of our sector’s
biggest responsibilities and a major opportunity to tackle
resource constraints.
A key part of our food-waste strategy is to make the best possible
use of any surplus food and food waste, whether it be through
redistribution of surplus food and ingredients or for use in animal
feed. In 2021, food waste increased by 67 basis points to 9.15%,
largely driven by a return to pre-pandemic product ranges of
higher complexity as well as challenges in accessing recycling
markets. A dedicated task force has been established to redress
this increase and ensure progress towards our target of halving
2017 food waste levels by 2030. Further information can be found
in the Trusted Partner section between pages 34 to 53.
‘Climate change and sustainability’.
This risk could impact our ability to achieve our
commitment on food waste; in the UK we are committed to
the industry initiative Champions 12.3 in halving food waste
by 2030.
See TCFD on pages 54 to 61
See Trusted Partner on pages 34 to 53
+67bps-4.1%
See Directors’ Remuneration Report on pages 120 to 141
See Risk Management and Risks on pages 72 to 87
29
Bakkavor Group plc
Annual Report & Accounts 2021
STRATEGIC REPORT
TRADING PERFORMANCE
Robust financial performance despite industry-wide
challenges
The UK delivered a 2.9% increase in like-for-like revenue
to £1,592.4 million (2020: £1,548.2 million) despite industry-
wide challenges (notably supply chain disruption and labour
shortages) intensifying through the period with volumes
constrained as a result. This performance represented a
positive recovery in volumes as lockdown restrictions eased
and demand for our fresh prepared products has remained
strong since, with like-for-like revenue down only 2.3%
compared to 2019.
The UK delivered a 7.8% increase in adjusted operating profit
to £97.8 million (2020: £90.7 million), with margins up by
30 basis points to 6.1% (2020: 5.8%) and no exceptional items
in 2021. This robust performance was delivered through a
combination of sales growth, an acute focus on driving further
efficiency and supply chain management, and a tight control
of costs. Profitability was held back by inflationary pressures
which accelerated towards the end of the year. However, our
pricing models mean we are able to pass on the inflationary
impact of key raw materials and we negotiate inflationary
increases for other materials, packaging, freight and labour
costs that sit outside of our cost models on a case-by-case
basis. Following discussions with our customers, we are
increasing pricing for 2022, in line with our expectations,
which, alongside our ongoing efficiency drive, will help offset
inflation in the costs which sit outside of our pricing models.
Looking forward, with inflation pressures expected to persist
and in certain instances heighten in the near term, we expect
to continue the dialogue with our customers around pricing
through 2022.
Whilst working hard to contain the impact of cost pressures
and labour challenges, we have ensured our operational
delivery has remained strong, as evidenced by a consistent
and high-level performance across health and safety, food
safety, quality, and service.
CATEGORY UPDATE
Overall, we have seen a positive recovery in the FPF market
post-pandemic. All our categories are in growth compared
to 2019 apart from salads, which faced production constraints
in 2021. We remain focused on driving an exciting pipeline
of activity to bring innovation to our categories, with the
launch of over 340 products in 2021, but in a controlled
and disciplined way given the wider industry challenges.
For a small number of sub-categories, we have taken the
decision to focus on core ranges to ensure we maintain our
customer service levels and manage our labour requirements.
Whilst performance in our meals category in the first quarter
was adversely impacted by lockdown restrictions, volumes
recovered well as restrictions eased into the summer, against
a weaker comparative period. This growth was primarily
driven by ready meals, supported by strong underlying
performance, new product launches and seasonal events.
We have, however, taken the decision to exit several lower
margin modern-deli category lines, which have traditionally
peaked in the summer and at Christmas. Whilst this improves
our ability to utilise our year-round capacity going forward,
the reduction in volumes combined with the disruption
associated with labour shortages and supply chain
challenges, has resulted in the meals category contributing
a lower level of sales in the second half of the year.
Our salads category has seen a significant recovery in
demand versus the prior year, driven by the return in
frequency of shopping visits and mobility through the year.
The seasonal summer peak in salads always requires an
increase in labour, however the pace of growth post-lockdown
combined with increasing challenges in labour availability
meant we were unable to meet all demand in this period. We
made the decision to focus on maintaining our high customer
service levels by delivering a reduced number of products
and successfully executed the launch of over 60 products
to refresh the whole salads range for one of our strategic
customers. Whilst food-to-go remains down compared to
2019, we have seen a natural strengthening of the category
and demand remained strong through the rest of the year.
UK FINANCIAL HIGHLIGHTS
£ million 2021 2020 Change
Reported revenue 1,592.4 1,566.6 1.6%
Like-for-like revenue
1
1,592.4 1,548.2 2.9%
Adjusted operating profit
1
97.8 90.7 7.8%
Adjusted operating profit
margin
1
6.1% 5.8% 30bps
Operating profit 97.8 69.1 41.5%
Operating profit margin 6.1% 4.4% 170bps
1 Alternative Performance Measures are referred to as ‘like-for-like’, ‘adjusted’ and
‘underlying’ and are applied consistently through this document. These are defined
in full and reconciled in the reported statutory measures in Note 36.
OVERVIEW
The UK is Bakkavor’s largest market, representing
85% of Group like-for-like revenue. Our combination
of scale, category leadership and insight, operational
excellence, and strong customer relationships drives
our market-leading performance in the UK. We have
23 factories, four distribution centres, a growing unit
and a head office in London, with over 15,800 colleagues.
We leverage our unrivalled consumer insight and scale
to produce innovative food that offers quality, choice,
convenience and freshness. This, combined with our
operational excellence, sees us produce more than 1,500
short shelf-life products, the majority of which are
delivered to our customers every day. We focus on strategic
relationships with the largest UK grocery retailers
which have long-term commitments to developing their
fresh prepared food offer for consumers. Tesco, M&S,
Sainsbury’s and Waitrose are our largest customers,
but we also supply all of the other UK grocery retailers.
UNITED KINGDOM
DIVISIONAL OVERVIEW
30
Bakkavor Group plc
Annual Report & Accounts 2021
In our desserts business, performance has been strong
compared to both 2020 and 2019. This performance reflected
the decision we made in the summer, in the context of labour
challenges, to deliver a more focused all-year-round product
range and protect the delivery of our seasonal products for
the important Christmas period, which we have successfully
executed. The launch of The Delicious Dessert Company
brand is delivering what we set out to do: bringing new,
younger consumers to the category. This range has been
rolled out to 900 stores across two strategic customers in
the second half of the year and we are looking to expand
the product range further.
Demand for pizza and bread remains robust, with significant
growth compared to 2019 and a positive year-on-year
performance versus 2020 despite lapping strong comparatives.
This was driven by good growth in flatbreads and premium
pizza ranges, as the increase in demand during the pandemic
has held up as restrictions have eased. Whilst promotional
dynamics have changed in this category, the demand for our
range of products remains strong.
STRATEGIC AND OPERATIONAL ACTIONS
Our full-year performance is testament to the robust
foundations we have laid down, with scale, category leadership
and strong relationships with customers that are committed
to driving sales of fresh prepared food through their store
networks and online channels. This positioning has enabled
us to successfully navigate the recent unprecedented
industry-wide challenges. However, we remain highly focused
on mitigating these ongoing challenges which emerged with
the UK’s exit from the European Union (“EU”) and accelerated
with the onset of the pandemic, including supply chain
disruption and labour shortages.
We have successfully minimised any disruption related to
the UK exiting the EU to date. Our detailed planning process
ensures ongoing compliance, and we are well prepared to
navigate the further administrative changes still to come.
Our inbound logistics platform in Spain continues to ensure
our import process works smoothly, and we remain well
prepared for the changes that were due in the second half
of 2021 but have been delayed to 2022.
We continue to work collaboratively to ensure our customers
remain well stocked with our high-quality products, whilst
agreeing appropriate pricing in the context of cost inflation.
To date, we have been relatively unaffected by the disruption
to distribution across the industry, and we have continued to
support our customers who manage outbound distribution
from our factories to stores.
The recruitment and retention of colleagues remains a
significant challenge for the Group, with certain regions
experiencing particularly heightened labour shortages.
We have taken several steps to mitigate the current labour
constraints, including enhancing our recruitment
programme, offering flexible shift patterns, the use of
apprenticeship programmes, referral bonus schemes, and
further investment in colleague training, facilities, transport
and wellbeing. We also took the decision, after an in-depth
benchmarking of our factory labour rates across the country,
to implement an out-of-cycle pay increase to the majority of
our factory-based colleagues. The impact of this significant
investment has been supported by customers through revised
pricing. Whilst labour shortages remain a challenge, we are
doing all we can to create a better place to work and position
the Group as an attractive employer.
Alongside our efforts to mitigate labour constraints, we
have been investing in automation and continuous process
improvement throughout the year to enhance productivity.
We have increased resource behind our operational
excellence team to ensure we maintain pace in delivering
on our efficiency investments and develop a strong pipeline
of projects, focused on reducing the reliance on labour.
Importantly, the recent roll-out of the new automated
‘smart’ manufacturing system (a Management Control
Reporting System) across our UK sites is providing us
with highly detailed factory data upon which to make
investment decisions that will maximise performance.
Looking forward, we expect to continue to deliver growth in
the UK as demand for our fresh prepared products remains
strong. However, as the industry-wide operational challenges
and inflationary headwinds are expected to persist through
2022, we expect further engagement with our customers, to
recover pricing, will be required. We are confident that, with
our strong relationships, experience, and relentless focus on
operational excellence, we will continue to manage and
mitigate these pressures effectively.
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STRATEGIC REPORT
DIVISIONAL OVERVIEW
CONTINUED
In the US, we have focused our attention on innovation
and investment in high-performing categories.
We continue to enhance our strategic partnerships with
both new and existing customers and prioritise capital
investment projects that will allow us to increase
capacity and drive operational performance. The US
remains a significant growth opportunity for the Group.
US FINANCIAL HIGHLIGHTS
£ million 2021 2020 Change
Reported revenue 180.1 146.5 22.9%
Like-for-like revenue
1
193.0 146.5 31.8%
Operating profit 8.9 0.6 1,383.3%
Operating profit margin 4.9% 0.4% 450bps
1 Alternative Performance Measures are referred to as ‘like-for-like’, ‘adjusted’ and
‘underlying’ and are applied consistently through this document. These are defined
in full and reconciled in the reported statutory measures in Note 36.
OVERVIEW
Our US business represents c.10% of Group like-for-like
revenue. Bakkavor has operated in the US for 13 years and
we have developed a strong understanding of the market,
its growth potential, and our key target customers. The
Group has five factories across the US and a head office
in Charlotte, with over 850 colleagues. We produce over
350 products across our core categories of fresh meals,
dips, artisanal breads, burritos and soups and sauces.
UNITED STATES
TRADING PERFORMANCE
Significant revenue growth and margin expansion despite
labour and inflationary headwinds
In 2021, we continued to build on the commercial and operational
progress made in the last two years. We further enhanced our
strategic customer relationships in traditional grocery retail and
online channels, and underpinned our platform for growth with
investment to unlock capacity across our existing footprint.
As a result, we continued to see positive momentum through
the period, supported by growth with our strategic customers
through national supply contracts, range expansion and
increased product penetration. Reported revenue increased
by 22.9% to £180.1 million and increased 31.8% on a like-for-like
constant currency basis to £193.0 million.
We are realising the benefits of the commercial and operational
reset that concluded 18 months ago, with an £8.3 million
increase in operating profit to £8.9 million, and a significant
step up in margin to 4.9% (2020: 0.4%). Margins were, however,
held back by significant inflationary pressure as we moved
through the year. This was notably a result of increases in
labour rates, both regulatory and through our own out-of-
cycle reset of wage rates, as well as inflation, most significantly
in proteins, packaging, and distribution costs.
Nonetheless, our simplified portfolio and improved
operational-efficiencies underpinned operational gearing
as volumes increased, and utilisation rates at our newly-
invested manufacturing footprint picked up meaningfully.
STRATEGIC AND OPERATIONAL ACTIONS
In the US, consumer demand for fresh and convenient meals
and other fresh prepared food continues to accelerate.
Retailers are increasingly looking to differentiate themselves
through own-label offerings, and as a leading supplier we are
driving growth in this market.
The US business achieved excellent growth in fresh meals,
supported by the successful nationwide roll-out of a range of
meals to over 500 stores for a new strategic customer and
continued growth with our e-commerce customers. We have
delivered a strong pipeline of innovation through the year,
bringing more healthy products to market such as the launch
of a range of low carbohydrate meals, as well as providing
convenient larger-format meals for families. We have also
broadened retailers’ own-label fresh food ranges, with the
launch of complementary burritos, soups and artisan bread.
Whilst industry challenges intensified through the year, the
business has delivered a strong operational performance in
the US, accommodating a significant increase in volumes with
minimal disruption. To secure the increase in headcount needed
to support the level of growth, we have adapted our approach
to colleagues by increasing wage rates and introducing new
incentives, reviewing wage rate differentials, and investing in
our site facilities to provide a more attractive working environment.
We have also experienced significant input cost inflation
in the period. However, there is an acknowledgement by our
customers that the issues are unprecedented and industry-
wide; through an open and constructive dialogue we have
successfully secured price increases in the latter part of
the year. The short-term lag in passing these costs on to
customers has held back our margin in the period.
During the year, we completed investment at our Charlotte
and Carson sites, providing the capacity to meet increased
demand for our fresh meals. The investment to enhance our
houmous processing capability and capacity at Carson
continues to progress well.
Looking ahead, we remain well placed to capitalise on the
significant growth potential in the US market. We are focused on
stabilising our workforce and enhancing our internal operational
structures to support the growth of our business and drive
operating leverage to further improve margin. Our existing
footprint will require further investment over the coming years
to increase capacity, and with this investment we believe these
sites can deliver $500m in revenue.
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Annual Report & Accounts 2021
CHINA
CHINA FINANCIAL HIGHLIGHTS
£ million 2021 2020 Change
Reported revenue 99.1 80.4 23.2%
Like-for-like revenue
1
100.2 80.4 24.6%
Operating loss (4.7) (7.7) 39.0%
Operating profit margin (4.7%) (9.6%) 490bps
1 Alternative Performance Measures are referred to as ‘like-for-like’, ‘adjusted’ and
‘underlying’ and are applied consistently through this document. These are defined
in full and reconciled in the reported statutory measures in Note 36.
OVERVIEW
Our China business represents 5% of Group like-for-like
revenue. From operating within the region for over 15
years we have developed a strong understanding of
this nascent market and its significant growth potential.
We have nine factories, one farm, and a head office in
Shanghai with over 2,200 colleagues. We primarily
supply large foodservice customers with over 1,300
products across food-to-go salads, sandwiches and
wraps, and bakery categories.
2021 has been a period of recovery following the impact of the
COVID-19 pandemic. Although ongoing regional restrictions
impacted our sales, we continued to build on our strategic
customer relationships with western foodservice players
and are developing our presence in both retail and office
catering. With strategic investment across our footprint
largely complete, we have significant headroom for growth,
providing customers with our innovative fresh prepared food.
TRADING PERFORMANCE
Steady recovery and margin improvement, moderated
by short-term headwinds
Whilst China has largely recovered from the pandemic, it continues
to see periodic impacts from regional lockdowns, with like-for-like
revenue down 2.4% compared to 2019. The significant like-for-like
revenue growth in 2021 of 24.6% to £100.2 million, and reported
revenue growth of 23.2% to £99.1 million, reflected strong growth
in Bakery, Hong Kong and new channels, partially offset by reduced
volumes from certain foodservice customers. We maintain a
positive outlook for continued growth in 2022 and beyond.
Whilst the business remains loss making from an operating
profit perspective, it has delivered positive EBITDA and
operating losses have reduced considerably with the steady
recovery in volumes. However, inflationary headwinds and the
adverse impact of weather on seasonal produce have held
back margin improvement in the second half, with pricing on
leaf crops alone over three times the historical market rate.
Our strategic investments for growth in the region are nearing
completion, with the new site in Wuhan operational since April
2021 and Xi’an due to complete in the second quarter of 2022.
STRATEGIC AND OPERATIONAL ACTIONS
In China, consumer demand for fresh, convenient and healthy
products across all channels has accelerated. We continue to
be well-positioned to capitalise on this opportunity, and in
2021 we launched over 550 products and delivered significant
progress on new channel opportunities. In 2021 we were
awarded the supply of a range of food-to-go products for a
large campus canteen and delivered strong growth with a
strategic retail customer through range expansion and store
roll-out, as well as launching two healthy breakfast items for
a large coffee chain and introducing meat alternatives to our
sandwiches and wraps for strategic customers. We will
continue to target new channel opportunities for growth with
our existing range of fresh, great-tasting food.
The Bakery business has benefitted from our recent capacity
investment and continued to develop its customer base, particularly
with online players, and Hong Kong performance rebounded
in 2021 from April onwards through a combination of volumes
returning as lockdown restrictions eased and new customer
wins, as well as continuing to roll-out our Fresh Kitchen branded
retail counters.
While our post-pandemic recovery steadily improved through the
first half of the year, continued local lockdowns and the impact of
adverse weather on leaf crops has hampered performance.
The stringent government restrictions have resulted in regional
lockdowns and meant our key customer stores, often located
in more tourist and travel-centric areas, have had to close
periodically, with resulting volatility in demand that has held back
sales and presented operational challenges. Further, it was in the
summer, typically our seasonal peak in sales, when the leaf crop
was particularly affected by weather. The lower-quality produce
meant yield was reduced, with a knock-on impact on operational
efficiency and inflationary pressure, the impact of which was
exacerbated as we were required to purchase additional volume
outside of our contracted volumes. While labour also
continues to remain a challenge, and we are facing over 10%
inflation in wage rates, we have continued to work collaboratively
with our customers and suppliers to successfully manage these
challenges and maintained 100% service levels across our
customer base. We have put in place several measures to
mitigate the impact, including expanding our recruitment pool
and continuing to focus on automation opportunities across the
business. We expect inflationary pressures across labour and
raw materials to persist in 2022 but will continue to use a
number of levers to reduce the impact on our cost base
through new product development, operational efficiency and
customer price discussions.
Our significant strategic investments in the region are nearing
completion, providing an enhanced national platform for future
growth with broader supply capabilities. We successfully
transferred production to the new replacement site in Wuhan in
April 2021 and work on the new site in Xi’an is progressing well,
with a slight delay due to government restrictions on construction
in the region; Xi’an is now due to complete in the second quarter
of 2022. This will provide a well-invested and solid platform for
growth with plentiful capacity to capture the meaningful growth
opportunity within the Chinese market; we expect operational
leverage to increase significantly as demand continues to recover.
Overall, we are well placed to drive further growth with our
existing key customers as they continue to expand their store
footprint and capitalise on new channel opportunities as we
diversify our customer base. While inflationary headwinds and
the impact of COVID-19 are expected to persist in 2022, with
our investment in capacity expansion nearly complete, we
have built a strong platform for growth.
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STRATEGIC REPORT
TRUSTED PARTNER
Trusted Partner:
our ESG strategy
Trusted Partner is our ESG strategy that guides our progress
towards building a more sustainable business, defining our action on
the issues that matter most to our stakeholders – across our supply
chain, our own operations, and in our workplaces and communities.
Trusted Partner was developed in 2019 following a materiality
assessment to help determine the sustainability issues that
matter most to our business. We considered the priority topics
for the food manufacturing sector that are critical to sustainable
development and where we can have most impact, as well
as those that will be essential for our business in creating
long-term value. We also consulted internally, reviewed the
priorities of our stakeholders, and cross-referenced against
external sustainable development frameworks such as
the UN Sustainable Development Goals (“SDGs”), the UN
Guiding Principles on Business and Human Rights and the
recommendations from industry organisations such as IGD
(Institute of Grocery Distribution). The outcome of the materiality
assessment informed the three focus areas of our Trusted
Partner framework and are reflected in our commitments. Our
material issues are also considered as part of our ongoing risk
assessment, with each issue linked to the relevant principal risk.
We will review our material issues in 2022 to ensure that the
strategy and focus areas remain relevant.
We seek to align with global standards and frameworks.
We have mapped how our Trusted Partner strategy supports
the UN SDGs on our website (www.bakkavor.com/en/esg/
sustainable-development-goals).
This section summaries our Trusted Partner strategy
and progress in 2021, as well as our priorities for 2022.
Specifically in relation to climate change, we have voluntarily
reported under the recommendations of the TCFD, and this is
captured in the TCFD section of this report on pages 54 to 61,
which includes all data on greenhouse gas emissions.
All other supporting non-financial data is on pages 49 to 53.
All data shown is for the calendar year 2021 and at a Group
level, unless specified. Further information on our approach
and activities can be found at www.bakkavor.com/esg.
CONTACT ADDRESS FOR ESG AND SUSTAINABILITY ENQUIRIES
ESG@bakkavor.com
See our TCFD section on pages 54 to 61
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Bakkavor Group plc
Annual Report & Accounts 2021
A REVIEW OF OUR ESG PROGRESS FROM DONNAMARIA LEE,
CHIEF PEOPLE OFFICER
The challenges of 2020 saw the COVID-19 pandemic place a
huge amount of strain on our business, colleagues, customers,
suppliers, and communities. In 2021, we focused on building
the resilience we needed to tackle the recovery from the
pandemic, and pressing social and environmental challenges.
Our climate change roadmap continues to be a primary focus.
After laying down our commitment to achieve Net Zero
emissions in our Group-wide operations by 2040, we had to
quickly embed this goal within our business. This continues
to involve bringing together key stakeholders from across
the business to understand what this commitment means
for our long-term strategy, energise thinking around our
approach, and planning our roadmap and the roll-out of
this across the business to support delivery.
Our roadmap – which you can read about on page 59 in
our TCFD report – is a work in progress, but gives us the
structure we need to work towards our goal. Going forward,
we will build granularity in the form of additional targets,
objectives and innovative strategies for meeting our goals.
We will also share more about what we are learning along
the way. The lead-up to the COP26 climate conference and
subsequent outcomes demonstrate the urgency of tangible
action from all sectors of society, and we are committed
to playing our part. We are seeing positive progress in
this area operationally, as our net greenhouse gas emissions
decreased by 4.1% on 2020, and our emissions intensity
ratio (emissions per £million revenue) reduced by 10.0%.
Another area of focus in 2021 has been re-energising
our environmental and social agenda, and enhancing
accountability for our goals. We have done this through
setting up our ESG Executive Committee; a cross-functional
group of senior leaders who cascade our Trusted Partner
strategy across the business and embed our ambitions
and activities in their day-to-day roles.
I am particularly proud of the way our business has enhanced
our close working relationships with our suppliers by
increasing engagement on environmental and ethical issues.
Our ability to reach out to the hundreds of organisations we
source from globally and ensure we are aligned on our ESG
criteria truly demonstrates how responsible sourcing is
central to how we do business and core to our values.
Finally, we’ve made big strides with our people agenda
this year. I’ve been fortunate to have actively participated
in both our Wellbeing Steering Committee and our I&D
Forum. Alongside the rest of our industry, we have faced
significant challenges in the labour market and turnover
rates. Nevertheless, I have witnessed first-hand how much
passion there is for making Bakkavor an equal, inclusive
and engaging workplace, and remain confident that we
can overcome these challenges and continue to uphold
Bakkavor as a place where everyone can thrive. This has
also been reflected in the evolution of our Group values,
with further information available on page 16.
Now more than ever it is clear that our Trusted Partner
strategy underpins a more resilient Bakkavor for our
colleagues, communities, suppliers, customers and other
stakeholders. In 2022, we’ll take a fresh look at the issues
it encompasses and reset our commitments to ensure
we continue to deliver value, be ambitious and progress
on our journey.
Donna-Maria Lee
Chief People Officer
ESG: Making Bakkavor a more resilient business
Our cross-functional ESG
Executive Committee is
re-energising our Trusted
Partner agenda and enhancing
accountability for our goals.
Donna-Maria Lee
Chief People Officer
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Annual Report & Accounts 2021
STRATEGIC REPORT
See pages 40 to 41
See pages 42 to 44
SUSTAINABILITY AND
INNOVATION IN OUR
OPERATIONS
• Supplier Code of Conduct launched to over 500 direct suppliers to Bakkavor UK.
• 100% of these suppliers engaged with on environmental and social issues.
• All direct suppliers to the UK business are registered with Sedex.
• Launched Deforestation Statement (https://www.bakkavor.com/en/esg/
policies-and-documents/), outlining our UK business’s commitment to zero net
deforestation, and our sustainable sourcing practices for palm oil, soy in animal
feed and paper packaging.
Resource Efficiency and Net Zero
• 6.1% reduction in our gross (location-based) carbon footprint (Scope 1 and 2),
and a 4.1% decrease in our net (market-based) carbon footprint.
• 10.0% improvement in the carbon efficiency of our production, as our Group
intensity ratio reduced to 92.6 gross tCO
2
e/£m reported revenue.
• UK gross emissions reduced by 14.2% and emissions intensity ratio decreased
by 15.6% to 71.8 tCO
2
e/£m reported revenue from 85.1 in 2020.
• 55% reduction in energy use from lighting being delivered through our continued
roll-out of LED lighting at sites.
UK Food Waste
• 9.15% food waste, up from 8.48% in 2020, driven by a return to pre-pandemic
product ranges and access to recycling markets. A dedicated task force has
been established to ensure we deliver our target of halving food waste by 2030.
• More than doubled food donations to charities compared to 2020, distributing
the equivalent of 412,643 meals
(based on a 420g portion).
Impact of Packaging
• Almost 400 tonnes of plastic packaging removed in our UK business and total
volume of plastic and product packaging reduced by 3% (704 tonnes).
• 99.8% of our UK product packaging is recyclable.
Sustainable Product Development
• 50% of our UK business’s product ranges are vegetarian and almost one in five
(19%) are vegan or plant-based.
• >60% of our UK products are healthier options as defined by the Department
of Health’s UK Nutrient Profiling Model and 83% are already compliant with
the Food Standard Agency’s salt reduction targets for 2024.
TRUSTED PARTNER SUMMARY
We source thousands of ingredients from over
500 suppliers across more than 50 countries.
Responsible sourcing in our supply chain involves
working with growers and partners and using
our influence to promote a shared understanding
of the importance of respecting human rights,
environmental risks, and ingredient integrity.
OUR KEY COMMITMENTS
• Zero net deforestation through sustainable
sourcing practices for our UK business’s forest-
risk commodities.
• Expand our human rights and environmental risk
mapping for our US and China businesses.
With 46 sites across the UK, US and China,
we have a responsibility to continuously
improve the environmental impact of
our sites.
This focus area encompasses how we
manage the impacts of our direct operations
and products: food waste, resource efficiency
and emissions, packaging and sustainable
product development.
OUR KEY COMMITMENTS
• Net Zero operational emissions across the
Group by 2040.
• Halve our UK food waste by 2030 as part of
our commitment to Champions 12.3.
• Actively engage each of our UK and US sites
to maximise the suitable surplus food available
for redistribution (2022).
• Eliminate unnecessary plastic packaging; using
only reusable or recyclable plastic packaging and
at least 30% average recycled content in plastic
packaging by 2025.
RESPONSIBLE
SOURCING IN OUR
SUPPLY CHAIN
Environmentally Sustainable Sourcing and Supply Chain Human Rights
Our Trusted Partner ESG strategy is based around three focus areas: Responsible Sourcing
in our Supply Chain, Sustainability and Innovation in our Operations, and Engagement and
Wellbeing in our Workplaces and Communities.
OUR PROGRESS IN 2021
OUR PROGRESS IN 2021
See our TCFD section on pages 54 to 61
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Bakkavor Group plc
Annual Report & Accounts 2021
ENGAGEMENT AND
WELLBEING IN OUR
WORKPLACES AND
COMMUNITIES
Colleague Wellbeing, Health and Safety
• 1% year-on-year increase in UK >7 day accidents per 100k employees, and a 16%
increase in major accident rate (per 100k employees). Despite this, both remain
well below industry averages and total accidents are down by 8%.
• >50% reduction in recordable accidents in the US, and no reportable
major accidents.
• 23% increase in reportable incidents in China, but zero major accidents.
• Eight wellbeing campaigns launched.
Responsible Recruitment and Employment
Engagement, Development and Retention
• 3 percentage point increase in median gender pay gap, with plans to address
this through a focus on female talent development in 2022.
• 42% of our Senior Executives are women, up from 32% in 2020.
• #1 ranked apprenticeship programme in TheJobCrowd’s survey in the
Consumer Goods & FMCG sector.
Local Causes and Community Engagement
• >£90,000 of charitable donations, including to our Group charity partners Action
Against Hunger and FareShare.
• New three-year charity partnerships launched in the UK with GroceryAid and
the Natasha Allergy Foundation, and in the US with four local foodbanks.
See pages 45 to 48
It is essential for us to provide a safe and
inclusive environment for our colleagues
where everyone can thrive and develop.
The health and safety of our colleagues is,
and always will be, our top priority.
We foster a culture that guarantees fair
labour rights and ethical employment.
We also aim to provide an environment
where colleagues can thrive, and feel that
their broader wellbeing is being supported.
In order to have a positive impact on our
local communities, we support the causes
that matter most to us.
OUR KEY COMMITMENTS
• Continue our commitment to health and safety,
targeting zero serious accidents across the Group.
• Continue to out-perform UK industry averages on
major and >7 day accident rates.
• Be recognised by our colleagues as supporting
them to achieve positive wellbeing.
• Drive awareness and action on the issue of
modern slavery.
• Promote an inclusive working environment,
where differences are valued and individuals feel
they can be themselves, without judgement.
• Reduce our employee turnover.
• Further develop our operational roadmap to Net Zero,
setting interim targets to guide our progress and hold
us accountable and continue to reduce operational
emissions through efficiency measures Group-wide.
• Update our Trusted Partner ESG strategy, reviewing
our material issues and resetting our ambition and
accountabilities.
• Implement operational programmes to make step changes
in reducing our food waste, getting back on track to our goal
of a 50% reduction by 2030.
• Further expand our responsible sourcing and supplier
engagement tools with our international businesses.
• Continue our focus on Inclusion and Diversity through
female talent development and supporting the I&D agenda
through events, awareness raising and our partnership
with GroceryAid.
Headline priorities for 2022
OUR PROGRESS IN 2021
• Rated as ‘Advanced’ in Stronger Together’s organisational performance
assessment of how we address modern slavery risk in our business.
• All our UK sites are classified as ‘low risk’ on Sedex’s SAQ.
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Bakkavor Group plc
Annual Report & Accounts 2021
STRATEGIC REPORT
MANAGEMENT AND GOVERNANCE OF TRUSTED PARTNER
In 2021, we sought to further embed our Trusted Partner strategy across the business by enhancing governance and increasing
accountability, which is summarised below. Detail of the governance in place in relation to climate-related issues is captured in
the TCFD section on pages 54 to 61, and the Group’s overall governance framework is in the Corporate Governance Compliance
Statement on pages 91 to 92.
• Accountable for ensuring the impact of ESG issues on the long-term strategy of the Group are considered.
• Review of Group policies and commitments, including the Net Zero target, non-financial KPIs, progress and approach.
2021 update:
• Received quarterly updates on the Group’s ESG performance and reviewed commitments and policies on ESG matters.
• Received dedicated ESG training on a range of topics including climate change, biodiversity and social matters.
• We will continue to build on the Group Board knowledge and skills matrix, and incorporate a broader range of topics during 2022.
For more information on Group Board competencies see pages 94 to 96.
ESG Board level sponsor: Agust Gudmundsson, Chief Executive Officer
• Dedicated Board-level committee
for ESG matters.
• Reviews Trusted Partner strategy
progress and provides guidance to the
ESG Executive Committee and
recommendations to the Group Board.
• Umran Beba appointed designated
Non-executive Director for ESG matters.
Updates Group Board on all ESG matters,
including the Committee’s oversight of
the execution of the Group’s Trusted
Partner strategy.
Chair: Simon Burke,
Non-executive Chairman
• Review principal risk, ‘Climate change and
sustainability’ and reporting under TCFD
regulations and ensure that ESG issues are
adequately reflected in other connected
principal risks (see pages 78 to 86).
• Ensure ESG risks are considered in the
Group’s viability assessment and
impairment reviews, and that financial
reporting disclosures of these risks are
fair and balanced.
Chair: Jane Lodge, Independent
Non-executive Director
• Reviews the potential linking
of performance to incentives
and remuneration.
Chair: Denis Hennequin, Senior
Independent Non-executive Director
• Oversight of ESG strategy and performance against commitments.
• Receives updates from the ESG Executive Committee on ESG performance and related risks.
• Directs strategic implementation of, and capital allocation for, strategic projects supporting the Trusted Partner objectives.
• Leadership of ESG is with Donna-Maria Lee, CPO, supported by CEO at Group Board.
• Formalised in early 2021. Provides direction and manages the delivery of our Trusted Partner strategy. Co-ordinates the 16 workstream activities.
• Reviews and acts on information and performance on ESG-related matters affecting the business. Identifies financial resources
required to meet commitments.
• Considers and assesses ESG risks insofar as they relate to principal risks where Committee members are owners of principal risks.
• Comprised of Senior Executives and other senior-level experts from Corporate Affairs, Procurement, Technical, Operations, Legal,
Risk, Finance, Commercial and regional business divisions.
Chair: Sally Barrett-Jolley, Head of Corporate Affairs
TRUSTED PARTNER
CONTINUED
ESG EXECUTIVE COMMITTEE
MANAGEMENT BOARD
NOMINATION AND ESG COMMITTEE AUDIT AND RISK COMMITTEE REMUNERATION COMMITTEE
GROUP BOARD
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Annual Report & Accounts 2021
INTEGRATING ESG WITH OUR RISK MANAGEMENT
The importance of environmental and social issues are such that many of them are connected to our principal risks. We have
integrated our identified material environmental and social issues within how we review and update our principal risks in our
Group risk management framework, as shown below. For more information on Bakkavor’s governance and management of
risks, see pages 72 to 87.
RESPONSIBLE SOURCING
IN OUR SUPPLY CHAIN
ENGAGEMENT AND
WELLBEING IN OUR
WORKPLACES AND
COMMUNITIES
SUSTAINABILITY
AND INNOVATION
IN OUR OPERATIONS
8 Colleague Wellbeing, Health and Safety • Availability, recruitment and retention
of employees
• Health and safety
9 Responsible Recruitment and Employment • Availability, recruitment and retention
of employees
10 Engagement, Development and Retention • Availability, recruitment and retention
of employees
11 Local Causes and Community Engagement • Availability, recruitment and retention
of employees
ESG ISSUES PRINCIPAL RISKESG FOCUS AREA
4 Food Waste • Climate change and sustainability
5 Resource Efficiency and Emissions • Climate change and sustainability
6 Impact of Packaging • Climate change and sustainability
7 Sustainable Product Development • Consumer behaviour and demand
1 Supply Chain Human Rights • Climate change and sustainability
2 Environmentally Sustainable Sourcing • Climate change and sustainability
3 Ingredient Traceability and Integrity • Food safety and integrity
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Bakkavor Group plc
Annual Report & Accounts 2021
STRATEGIC REPORT
TRUSTED PARTNER
CONTINUED
SUPPLY CHAIN HUMAN RIGHTS
The complexity and pace of the global food supply chain places
it at risk of human rights abuses. Ensuring the welfare and
rights of workers throughout our supply chain is a top priority
for our business, and a central element to our responsible
sourcing approach.
In manufacturing high-quality, innovative and freshly prepared
food, we source thousands of ingredients from over 500 direct
suppliers across more than 50 countries. We work openly
and in partnership with our suppliers to communicate our
expectations on human rights, environment sustainability
and ensure ingredient integrity.
We have a clear responsible sourcing strategy, which is
overseen by a dedicated Steering Committee and reports
to our ESG Executive Committee. We have developed a
bespoke supplier risk management system using both
supplier data and global intelligence sources.
All direct suppliers are required to sign up to our Supplier
Code of Conduct, which outlines the important areas and
standards that we expect our suppliers to meet and forms
part of our supplier selection process. These areas include
human rights, ingredient integrity and environmental
sustainability. Targeted questionnaires completed by each
supplier allow us to understand where the risks in our
supply base are and enable us to work with our suppliers
to manage and mitigate these risks. We recognise that
compliance with these standards can be demanding, and
we are actively working with our supplier partners to
achieve full compliance within agreed timeframes.
Responsible Sourcing in our Supply Chain
encompasses three distinct but related
issues: supply chain human rights,
environmentally sustainable sourcing
and ingredient integrity.
RESPONSIBLE SOURCING
IN OUR SUPPLY CHAIN
KEY COMMITMENTS
• Work collaboratively with our suppliers on any breaches
of our Code of Conduct to develop and implement a clear
and appropriate corrective action plan (ongoing).
• Empower worker voice and collaborative dialogue within
our direct supply chain by promoting independent
whistleblowing channels and effective grievance reporting
mechanisms (UK: 2022, China and US: 2024).
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The Supplier Code of Conduct covers issues that include
modern slavery, migrant labour, child labour, working hours,
discrimination, freedom of association, collective bargaining,
land rights, bribery and corruption, environmental impact, and
other important topics. Suppliers are required to demonstrate
compliance with the Code of Conduct through self-assessment
questionnaires and we seek corrective actions where required.
‘Retain and engage’ is our preferred approach and in 2021, we
engaged with over 500 direct suppliers on their compliance. We
have collaborated with a small proportion of suppliers, who did
not initially meet our requirements, agreeing action plans to
deliver the improvements necessary to ensure that they all now
meet the requirements of our Code of Conduct. Doing so has
reduced risk for Bakkavor, our customers and the suppliers
themselves, encouraging a more resilient, collaborative, and
transparent supply chain.
In 2021, we made a commitment to zero net deforestation,
as outlined in our Deforestation Statement, for the forest-risk
commodities: palm oil, soy, paper, beef and cocoa. We have
specific sourcing approaches for high-risk raw materials, such
as sourcing only 100% sustainably sourced palm oil and
supporting the production of sustainable soy through the
purchase of credits for 100% of our embedded soy footprint,
(that is, used as feed in animal products). As an own-label
manufacturer, we implement our customers’ commitments,
such as sourcing through commodity-specific sustainability
standards including the Rainforest Alliance and the Marine
Stewardship Council (“MSC”).
More information can be found on our website at:
www.bakkavor.com/en/esg/responsible-sourcing.
INGREDIENT INTEGRITY
Our success in continuing to deliver products of the highest
quality to our customers is built on trust in our ability to
consistently deliver high standards of raw material integrity
and traceability.
Our food safety and integrity approach aims to minimise
the risks of unauthorised or unsafe food ingredients entering
the Bakkavor manufacturing chain, a practice known as
‘food fraud’.
Our strategic approach relies on gathering intelligence from
a variety of sources. Verification processes include laboratory
analysis, traceability checks and audits of materials where
claims are made. Our governance process includes supplier
audits and/or investigations to manage the variety of materials
we source from across the world. In 2021 we almost doubled
the number of traceability checks and tests conducted
compared to 2020.
Where we identify high-risk ingredients, we work directly with
our suppliers to understand their control systems, share best
practice, and reduce the risk of fraud and adulteration in our
global supply chain.
More information on our approach to food integrity and food
safety can be found on www.bakkavor.com/en/about-us/
business-activities/ensuring-safety-and-quality.
KEY COMMITMENTS
• Zero net deforestation for our key forest-risk
commodities: palm oil, soy, paper, beef and cocoa,
through our responsible sourcing strategies.
ENVIRONMENTALLY SUSTAINABLE SOURCING
Procuring the raw materials that we use as sustainably
as possible, with regard for impacts on the land, water
and biodiversity in their growing and production, not only
ensures care for the planet, but improves the resilience
of our supply chain.
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STRATEGIC REPORT
This focus area encompasses how
we manage the impacts of our direct
operations and products. It comprises
four ESG issues: food waste, resource
efficiency and emissions, impact of
packaging and sustainable product
development.
FOOD WASTE
Globally, food waste contributes between 8% and 10%
1
of total
man-made GHG emissions and remains a major priority for
our business and the food sector as a whole. We have been
measuring our food waste since 2017 using the principles and
template of the ‘Target, Measure, Act’ toolkit developed by the
non-profit organisation WRAP and the IGD.
Our approach to reducing food waste in our manufacturing
operations is focused on three areas: minimising waste
created in the first place by optimising process efficiency in
new product development, careful monitoring of product
lines, and avoiding waste through redistribution. We aim to
redistribute to people where possible through redistribution
networks such as FareShare and Company Shop, through our
own staff shops and local organisations, or to animal feed.
UK food waste is one of our non-financial KPIs, and in 2020
we entered into a refinancing agreement that included an
ESG margin adjustment based on our performance on both
UK food waste and UK carbon emissions intensity.
2021 performance
Despite positive progress made in 2020, the return to more
normal production levels, as the impact of the pandemic
eased, resulted in a 0.67% increase in UK food waste to 9.15%
in 2021. Following review of our performance through the first
half of the year, the increase in food waste was escalated as
a priority at ESG Executive Committee level and a number of
operational and governance improvements were implemented
to address this upward trend, which included identifying
priority sites for targeted action. Updated procedures and
guidelines will be rolled out from January 2022 in order to
strengthen our processes and support site-by-site food
waste reduction programmes.
In China, we launched a new direct-to-consumer channel for
selling surplus bakery products on a popular e-commerce
platform at a reduced cost, which has helped significantly
reduce potential waste.
See data on page 49
With 46 sites across the UK, US and China, we have a
responsibility to continuously improve the environmental
impact of our operations by minimising waste and using
resources more efficiently. In addition, we work in partnership
with our customers to continually improve the sustainability
of our products by improving packaging design, using more
sustainable packaging alternatives and innovating to develop
lower environmental impact products.
READ MORE
BAKKAVOR.COM/EN/ESG/SUSTAINABILITY-AND-INNOVATION
TRUSTED PARTNER
CONTINUED
CONTINUED
SUSTAINABILITY AND
INNOVATION IN OUR
OPERATIONS
KEY COMMITMENTS
• Continue working towards our Champions 12.3 target of
reducing food loss by preventing it at each of our sites, whilst
measuring and reporting our progress annually (2030).
• Actively engage each of our UK and US sites to maximise
the suitable surplus food available for redistribution (2022).
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1 IPCC, 2019: Climate Change and Land: an IPCC special report on climate change, desertification, land degradation, sustainable land management, food security, and greenhouse gas
fluxes in terrestrial ecosystems (P.R. Shukla, J. Skea, E. Calvo Buendia, V. Masson-Delmotte, H.-O. Pörtner, D. C. Roberts, P. Zhai, R. Slade, S. Connors, R. van Diemen, M. Ferrat, E.
Haughey, S. Luz, S. Neogi, M. Pathak, J. Petzold, J. Portugal Pereira, P. Vyas, E. Huntley, K. Kissick, M. Belkacemi, J. Malley, (eds.)). In press.
RESOURCE EFFICIENCY AND EMISSIONS
Resource efficiency in our operations refers to how we optimise
the energy and utilities required in food manufacturing
including chilling, heating, powering machinery and maintaining
safety and hygiene standards. It is also our largest area of focus
for addressing the direct climate impacts of our business.
In January 2021, we committed to becoming a Net Zero carbon
emissions business across our Group operations – US, UK and
China – by 2040. We have outlined the structure of our Net
Zero roadmap as well as our exposure to climate risks and
opportunities in our TCFD report.
See our TCFD section on pages 54 to 61
Bakkavor has active programmes to reduce energy consumption
and associated carbon emissions. Energy performance of
sites is closely monitored, with all eligible UK manufacturing
sites operating under Climate Change Agreements. A number
of projects have been implemented or are planned across the
business to improve energy efficiency and reduce carbon.
These have been compiled into a carbon tracker tool which
is reviewed and updated on a regular basis and forms a key
element of our carbon reduction plan.
Energy efficiency is a central component of our Net Zero
roadmap, and further detail can be found in our TCFD report,
including information for Streamlined Energy and Carbon
Reporting (“SECR”) on page 60.
2021 performance
Total energy consumption in the UK decreased by 9.0% to
521,885,147 kWh compared to 2020. This has been driven by
continued progress in our ongoing capital investment plan to
upgrade our refrigeration systems away from using fluorinated
(“F”) gases to lower Global Warming Potential (“GWP”) and/or
CO
2
systems. We also implemented several energy efficiency
projects across our sites, including compressed air, hot water
and steam systems, and we continued a £1 million project
converting lighting to more efficient LEDs. This project will help
to deliver a 55% reduction in energy when complete in 2022.
Further upgrades are part of our ongoing pipeline for 2022.
Since 2017, our UK electricity supply has been sourced
through a renewable supply contract, and comprised 86%
of our gross UK Scope 2 emissions in 2021.
Energy consumption of our US business comprises 8% of the
Group’s total. We have several ongoing site-specific programmes
to challenge and reduce refrigeration demand, and assess gas
efficiency. Our facilities in China contribute 7% of Group energy
consumption in 2021. General energy efficiency upgrades
are being considered as part of our ongoing maintenance,
refurbishment and capital expenditure programmes.
For carbon emissions and energy performance and our
Net Zero commitment refer to the TCFD section.
See carbon emissions data on pages 60 to 61
Water
As a food manufacturer, a consistent and adequate supply of fresh
water is critical to our business operations, for hygiene purposes,
in food preparation and in cooking processes. All of our sites have
fully functioning and safely managed water, sanitation, and hygiene
(“WASH”) services for all workers. This is vital for our safe
operating food hygiene standards and is incorporated into
our Group health, safety, and environment policies.
Six of our UK sites (those around the Thames basin), one of
our US sites (Carson, California), and three of our China sites
(Beijing, Xi’an, and the head office in Shanghai) are currently
within basins considered to be at high risk according to the
WRI Aqueduct tool’s measure of water stress. To date, we
have not experienced detrimental impacts due to water
availability at these or other sites, however, we have set
ourselves a commitment to optimise operational water
intensity per tonne of product (whilst maintaining product
quality and integrity) by monitoring usage and exploring
machinery upgrades that increase efficiency.
2021 performance
We improved our UK Environmental Management System,
which included risk management standards, guidance
and tools. This system covers a number of environmental
indicators including water consumption and treatment.
This has led to a significant improvement in understanding
of compliance at site level and has resulted in a stepped
change in our environmental audit scores through 2021.
We have begun a review of our environmental training
material around our key risks, supporting our learning
and development team, and this will continue into 2022.
As we are in the process of upgrading our water tracking
and measurement procedures, water consumption data is
not yet available for 2021. We reported our consumption and
management of water through CDP’s water questionnaire,
which can be found on www.cdp.net.
KEY COMMITMENTS
• Achieve Net Zero carbon emissions in our Group
operations by 2040.
• Work towards optimising operational water intensity per
tonne of product, whilst maintaining product quality and
integrity, reporting internally on a monthly basis through
the environmental tracker (year-on-year).
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STRATEGIC REPORT
TRUSTED PARTNER
CONTINUED
IMPACT OF PACKAGING
To ensure our freshly prepared products maintain high
standards of food safety and quality, packaging is critical.
It also helps extend product shelf-life, which in turn reduces
food waste. Historically, plastic packaging has been used in
a variety of formats across our product ranges as it has the
criteria to ensure product integrity and safety. However,
plastics, in particular single-use formats, contribute to the
global pollution problem and originate from non-renewable
resources. Choosing the right packaging materials and
formats alongside our customers is therefore important to
balance shelf-life, safety and quality along with the circularity
and sustainability of food packaging materials.
We address the sustainability of our packaging through our
internal Packaging Forum working group, comprised of
packaging technologists and sustainability, development
and commercial team members. The group met throughout
2021 to share updates from respective businesses and
departments, discuss challenges and cross-pollinate ideas
and innovations.
2021 performance
In 2019, we signed up to The UK Plastics Pact and in 2021 we
continued with our ‘remove and replace’ plastic strategy which
supported strong progress against these goals. We have
removed nearly 400 tonnes of plastic from the UK business.
This has been achieved by using lighter grade where possible,
eliminating some packaging components such as additional
lids and by switching to alternative materials such as
cardboard. Switching to cardboard, where appropriate, also
helps us to maximise recyclability. 99.8% of our UK packaging
is now recyclable and 81.2% is made from recycled or
renewable materials such as cardboard.
As of 2021, 100% of our paper and card based packaging
is sourced from certified sustainable sources such as FSC
(Forest Stewardship Council) and PEFC (Programme for
the Endorsement of Forest Certification) forests.
We also continue to increase the use of plastics with recycled
content, with an average of 45.6% recycled content across all
of our plastic packaging portfolio – well ahead of the 2025 UK
Plastics Pact target. This is also helping us to mitigate the
impact of the incoming Plastics Tax, which applies to plastic
packaging with less than 30% recycled content.
See data on page 49
SUSTAINABLE PRODUCT DEVELOPMENT
As a business we want to help facilitate the shift to healthier,
more sustainable lifestyles by producing a wide range of
healthy, innovative and great-value products that suit vegan,
vegetarian and flexitarian diets, including products that are
part of our strategic customers’ plant-based ranges.
We monitor the latest consumer trends and this insight
is used to inform our new product development. In 2021,
consumers’ focus on the environment and desire for more
sustainable food options has heightened, with the COP26
climate conference in November 2021 bringing this to the
front of mind. We have a cross-functional team that is focused
on product sustainability criteria, establishing how it can be
measured and managed.
2021 performance
In 2021, of our UK product portfolio:
• 50% of our product ranges are vegetarian and almost one
in five (19%) are plant-based.
• 83% of our products are already compliant with the Food
Standard Agency’s salt reduction targets for 2024.
• More than 60% of our products are healthier options as defined
by the UK’s Department of Health UK Nutrient Profiling Model.
• Over 400 of our products contain at least one of the
recommended five portions of veg portion and we’re working
hard to increase the veg content in our product ranges.
In China, we have also seen increased demand for meat
alternatives and sustainable diets. To support this, we have
collaborated with well-known plant-based brands and
launched several new products for our retail and foodservice
customers. In the US, retailers are increasingly looking to
provide products that promote healthier lifestyles, reduce food
waste and offer alternatives to animal proteins. Our product
developers have a particular focus on reducing food waste,
for example, by using different edible parts of fruits and
vegetables which have in the past been discarded and we
have also developed a low-carbohydrate range of fresh meals
for one of our strategic customers.
We have also continued to focus on improving the nutritional
profile of our ranges, working with our customers to adapt
recipes which meet nutrition targets in line with the UK
Government’s updated obesity strategy. We do this both by
adapting existing recipes to lower levels of fat, sugar and salt,
and also through developing new alternative products.
KEY COMMITMENTS
• Support progress towards achieving The UK Plastics
Pact’s 2025 industry goals of eliminating unnecessary
plastic packaging; 100% reusable or recyclable plastic
packaging and at least 30% average recycled content
in plastic packaging.
KEY COMMITMENTS
• Work with customers to meet their nutrition targets on
salt, sugar, saturated fat and overall calories through
reformulation.
• Enable sustainable diets through our product portfolio by
continuing to lead and drive plant-based fresh prepared
product ranges.
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Engagement and Wellbeing in our Workplaces
and Communities addresses four issues;
colleague wellbeing, health and safety,
responsible recruitment and employment,
engagement, development and retention,
and local causes and community engagement.
ENGAGEMENT AND WELLBEING
IN OUR WORKPLACES AND
COMMUNITIES
COLLEAGUE WELLBEING, HEALTH AND SAFETY
Health and Safety
We will always aim for a zero-harm workplace environment
and our goal is for no accidents. Whilst in most manufacturing
environments, accidents will occur, we still consistently
outperform industry averages on workplace safety.
In 2021, we reviewed our health and safety (“H&S”) strategy to
drive a step change reduction in safety risks in the workplace.
It focused on working collaboratively across the Group,
increasing sharing of information and best practices, and
defining a set of global principles for all businesses to adopt.
We also further improved our UK H&S manual including
risk-management standards, guidance, and tools, focused on
our most significant risks. The documents are intended to offer
further clarity around our standards in simple ‘operational
language’ and further standardise our compliance tools.
2021 performance
In the UK, the number of major accidents increased by 13% on
2020. Our major accident rate (57 per 100k employees) is an
increase of 16%, but remains significantly below the HSE Food
Industry average of 211 major accidents per 100k employees.
>7 day accidents in the UK decreased by 2% (absolute number)
on 2020. The >7 day accident rate per 100k employees increased
marginally by 1% to 334, however this is less than half of the
HSE Food Industry average of 762. Total accidents in 2021
decreased by 5% and there were no workplace fatalities.
As in 2020, both major accidents and >7 day accidents in 2021
were predominantly due to slips and trips. During the year we
conducted a review and pilot project to identify the wellington
boots for operative workers that offer the most slip resistance,
comfort, chemical resistance and foot protection, while
meeting the hygiene requirements for cleanability. After
listening to the feedback and recommendations of our site
colleagues, a new level of approved products was introduced.
In 2022, we remain focused on reducing slip incidents by
continuing to analyse cleaning methods to help further reduce
slip risk, and continue to adopt good manufacturing practices.
In China, >7 day lost-time accident rate increased by 71% to
726 per 100k employees. However, there were zero major
accidents and zero workplace fatalities.
In the US, our rate of recordable accidents (defined by
Occupational Safety and Health Administration, “OSHA”) per
100k employees reduced by 55% compared to 2020, and there
were no reportable majors (defined by OSHA) or fatalities.
See data on page 50
KEY COMMITMENTS
• Continue our commitment to health and safety, targeting
zero serious accidents across the Group.
• Continue to maintain UK performance by out-performing
industry average on numbers of major accidents and >7
days lost time accidents.
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STRATEGIC REPORT
TRUSTED PARTNER
CONTINUED
Wellbeing
A healthy workplace is not just about the absence of physical
risk of harm. We aim to provide an environment where
colleagues feel valued, included and inspired to perform
at their best due to their broader physical, emotional and
financial wellbeing.
In 2021, we built on the wellbeing assessment conducted in
2020 by establishing a cross-functional Wellbeing Steering
Committee. Our CPO sits on the committee, which is
supported by our CFO as Group Board Sponsor, and includes
representation from HR, Operations, H&S, Occupational
Health, our GEF and Corporate Affairs. In 2021, this forum
drafted a Wellbeing Strategy for launch in 2022 that outlines
our multi-faceted approach to wellbeing, and details how we
will support colleagues’ physical, emotional and financial
wellbeing. This committee has also identified several
priorities including site wellbeing champions, improving our
wellbeing toolkit, developing a suite of training materials,
and a focus on mental health and musculoskeletal conditions.
We have continued to encourage colleagues to utilise the
resources provided by our wellbeing toolkit and launched
several campaigns during the year. This includes support
mechanisms such as our Employee Assistance Programme,
GroceryAid’s helpline, and Salary Finance – a financial
wellbeing hub provided as a benefit for all colleagues,
as well as our ‘Financial Wellbeing’, ‘Know Your Numbers’
blood pressure monitoring and ‘Back Care Awareness
Week’ campaigns.
Colleague wellbeing during the COVID-19 pandemic
The COVID-19 pandemic continued to have an impact on our
US, China and UK businesses through 2021, and processes
established in 2020 continued to ensure we maintained a safe
working environment and were compliant with the latest
Government guidance. This included additional, enhanced safety
measures implemented on top of our established industry-
leading food hygiene and safety controls. For example, we
implemented more frequent cleaning mechanisms, temperature
scanners, visors, masks and screens, additional handwashing
protocols and social distancing measures in common areas.
We continued to encourage colleagues to work from home,
where their role made this possible, gradually implementing
‘Return to office working’ guidelines following health and
safety risk assessments for each local office and site.
COVID-19 is one of our principal risks; for detail of our risk
assessment, mitigations and developments refer to pages
72 to 86.
RESPONSIBLE RECRUITMENT AND EMPLOYMENT
Responsible recruitment and employment ensures we have
policies, practices and values which foster a culture that
guarantees fair labour rights and ethical employment in our
own operations.
At Bakkavor, our values and culture will never be compatible
with any form of modern slavery. We have a Group Human
Rights and Ethical Programme in place, driven by our ethical
trade team, which is comprised of a Head of Human Resources,
two Senior HR Business Partners and an ethical trade
specialist. The programme is overseen by our Management
Board and progress is updated at ESG Executive Committee
meetings. We are committed to taking an active, leadership role
in driving best practice in this area and raising awareness
across our business so that our colleagues are well-equipped
to understand and recognise risks and report any concerns.
Through 2021, we rolled out new recommendations
following the implementation of the Sedex Self-Assessment
Questionnaire (“SAQ”) across all UK sites, following its
implementation at our Hong Kong site in 2020. The SAQ allows
our sites, and those of our suppliers, to understand good
labour practices, assess current risks, understand hotspots
and identify areas to drive change. These actions included:
• Sedex SAQ score reviews to ensure that sites are classified
as low risk;
• Implementing a new Internal Ethical Assessment process
to help prepare sites for their third-party ethical audits;
• Moving from internal to external audits of our labour providers,
to identify risks and improve the management of agency labour;
and
• Development of the new Forced Labour Response Plan Policy
and Remediation, which will enable Bakkavor to significantly
improve our scores against the Stronger Together and UN
Guiding Principles ethical standards.
We are a business partner with Stronger Together, a multi-
stakeholder organisation which aims to reduce modern slavery
risks and worker exploitation. In 2021, they conducted an
Organisational Performance Assessment of our business
and our progress in addressing modern slavery risks both
within our own business and our supply chain. Our overall
Organisation Progress Score in addressing modern slavery
risk of 77% is classed as ‘impressive’ and our management of
internal systems and processes was found to be ‘exceptional,
with many robust features and internal monitoring of progress’.
This reflects the combination of a score of 86% in managing
our own business and 74% for managing our supply chains.
KEY COMMITMENTS
• Be recognised by our colleagues as supporting them
to achieve positive wellbeing.
KEY COMMITMENTS
• Drive awareness and action on the issue of modern
slavery, rolling out campaigns and training so that
our colleagues know the indicators and how to report
them (ongoing).
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We are proud of the work we have done, and continue to
do in this area, and we will strive to make sure Bakkavor
continues to meet the highest ethical standards for our
customers, our suppliers and, most importantly, our
colleagues. Looking forward to 2022, we are prioritising
expansion of our processes, policies and sharing best
practice with our international businesses.
More details on our approach to combatting modern slavery
can be found in our Modern Slavery Statement on our website
(see www.bakkavor.com/en/esg/policies-and-documents).
Engagement
Open and constructive communication allows us to hear views
from all levels of the business, as well as keep our c.19,000
colleagues informed and updated. We perform a Group-wide
Employee Engagement Survey every 18 months and our latest
survey, completed in May 2021, had a response rate of 83%.
The 2021 survey provided valuable insights that were analysed
at local, site, business and Group level and have fed into
localised action plans and informed our colleague priorities.
Outside of the engagement survey, our UK GEF and Site
Employee Forums (“SEF”) create an open and regular channel
of communication between colleagues and management. SEF
representatives are elected by peers and play a vital role in
sharing best practices across sites, supporting local causes and
charities, providing support and seeking advice. In 2021, Jill
Caseberry was appointed the Company’s designated workforce
engagement Non-executive Director, providing colleagues with a
direct channel of communication and an independent champion
at Group Board level (see Governance section, page 103).
See data on page 51
Inclusion and Diversity (“I&D”)
Our success relies on the skills, experience and commitment
of the diverse range of colleagues who work for us. We want
to create an equal and inclusive workplace where colleagues
feel valued, included and inspired to perform at their best.
Following the launch of our I&D Policy in 2020, we convened
the I&D Forum in January 2021. This is chaired by the Group
General Counsel and Company Secretary and includes
representatives from every level of the organisation. Gender
diversity and increasing support for female leaders in their
career aspirations is the key area of focus, and the forum has
developed a three-year plan to drive and accelerate gender
equity within the organisation.
The I&D Forum also co-ordinated action around several key
events through the year, with site and business-level activities,
such as cultural events, educational webinars, shared
learning sessions and communication of relevant policies.
As we seek to drive greater action on I&D across our industry,
Bakkavor was a headline sponsor of the Diversity and
Inclusion in Grocery Programme. This initiative run by the
NGO GroceryAid brings together FMCG businesses to catalyse
change and challenge the sector to progress diversity and
inclusion. The programme encompasses a one-day in-person
event as well as online workshops and a mentoring scheme
which we participate in.
UK gender pay report summary
Bakkavor UK reports on our gender pay gap in accordance
with our legal requirements as a company with more than
250 colleagues.
Whilst we have taken several proactive steps to increase the
representation of women at senior levels and support career
progression for women in the business, our median gender
pay gap for 2021 increased to 5.1% from 2.1% in 2020. The
factors driving this increase are nuanced and influenced by
the higher turnover seen in the industry and more men in
middle to senior roles.
Our mean gender pay gap of 8.6% is, however, still well below
the UK average of 15.4% (all colleagues, ONS 2021). Women
at our Senior Executive level increased from less than a third
(32%) in 2020 to make up 42% in 2021. We remain committed
to promoting gender balance at all levels of our workforce.
In 2021, we have taken a number of actions to drive an
improvement in gender equality, through our I&D Forum’s
activities, as well as by embedding our talent strategy and
principles to enable all colleagues to reach their full potential.
This has included creating objectives and targets to attract,
recruit, retain and progress more women, and our Female
Mentoring Programme.
Refer to page 52 for the gender pay data, and further analysis
and information around our activities in this area can be found
in our gender pay report for 2021 (see www.bakkavor.com/
en/esg/policies-and-documents).
KEY COMMITMENTS
• Promote an inclusive working environment, where
differences are valued, and individuals feel they can
be themselves, without judgement.
• Reduce our employee turnover and maintain below
industry average.
• Implement an integrated talent-management and
development programme to provide our colleagues
with continuous learning opportunities.
ENGAGEMENT, DEVELOPMENT AND RETENTION
Providing a workplace where our colleagues feel engaged,
empowered, and able to be themselves is a core business
priority. This supports our objectives of attracting and
retaining the best talent and contributing to the local
economic development of our communities by being an
employer of choice. To do this, we have three main action
areas: colleague engagement through open and constructive
two-way communication; fostering an equal, inclusive and
diverse workplace; and developing our talent through training
and progression opportunities and fostering early careers
through our apprenticeship and graduate schemes.
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CONTINUED
Talent development
We are committed to providing learning and development
opportunities that are relevant, accessible and timely to all,
supporting differing career needs and aspirations.
In 2021, we invested in talent development with the launch
of new training programmes including a Front-Line Leaders
Development Programme for all UK factory supervisors and a
Leadership Development Programme for key leaders across
our Group. Through an online e-learning platform, we rolled
out refreshed modules on cyber security and anti-bribery and
corruption for our UK colleagues. This training is now an
annual requirement.
Our Early Careers Scheme continues to successfully develop
graduates and apprentices into the business in specialist roles
across several functions. Graduates complete placements
in a number of different business units and are guided through
a tailored leadership programme with the aim of nurturing
talent and creating long-lasting and rewarding careers.
Our apprentices, of which there are over 200, equip our business
for the future by upskilling critical job roles with the latest
standards and qualifications. As part of the recognised industry-
leading ‘Trailblazer Group’, we are one of a number of companies
designing apprenticeship standards, and to date have been
involved in writing 20 different standards. TheJobCrowd’s annual
survey included Bakkavor as the overall winner for Apprentices
in the Consumer Goods & FMCG industry sector, and our
Graduate programme also took second place in this category.
LOCAL CAUSES AND COMMUNITY ENGAGEMENT
As a major employer, we pride ourselves on the strong ties
we create with the communities in which we work. By rallying
our colleagues around key causes, such as supporting local
charities, schools and projects, we believe we can have a
positive impact on our local areas.
Our colleagues made a real difference in 2021 with various
fundraising initiatives for our chosen local charity partners.
Our UK sites made significant and regular donations of
food and other items to support local charities, events,
disadvantaged groups, COVID-19 vaccination centres, and
schools. Our Hong Kong business has redistributed around
150kg of surplus product to three local food charities that
deliver surplus food to homeless and vulnerable people.
In the US, our Carson site in California hosted a blood drive
for the Los Angeles Children’s Hospital and our Bread site
in Charlotte, North Carolina donated 1,000 loaves of bread
to health workers administering COVID-19 vaccines.
We also have two Group corporate charity partners –
Action Against Hunger and FareShare. Our graduates
and apprentices got involved in Tough Mudder races,
food collections, car washes, walking challenges and
a live cook-along to raise funds for these causes.
In 2021, we made donations of £15,000 to FareShare and
£27,000 to Action Against Hunger. We also donated £10,000
to help the award-winning social enterprise Community
Shop open its eighth ‘social supermarket’ in Knottingley,
West Yorkshire – where all food products are surplus –
and host ‘Community Hubs’ offering training opportunities
to help people back into education or work.
In December 2021, the UK business announced its new
charity programme, including a three-year partnership
to support GroceryAid and Natasha Allergy Research
Foundation. In parallel, our US business announced it will
support four foodbanks local to sites and a matched giving
scheme to raise further funds for each foodbank.
KEY COMMITMENTS
• Fundraise and support our key Group charities through
Group donations and colleague engagement fundraising
activities (ongoing).
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Annual Report & Accounts 2021
SUSTAINABILITY AND INNOVATION IN OUR OPERATIONS
Food waste
(UK) 2021 2020 2019 2018
Food waste as percentage of food produced 9.15% 8.48% 8.90% 9.10%
Food waste (tonnes) 44,382 41,625 43,913 48,757
Food waste avoided
Recycled as animal feed (tonnes) 21,265 24,752 27,520 30,499
Redistributed to people through FareShare and local charities (meal equivalents
1
) 412,643 189,095 165,550 86,309
Redistributed to people through other secondary markets such as redistributors
(meal equivalents) 955,405 1,538,643 989,190 1,350,000
Redistributed in Bakkavor staff shops (meal equivalents) 1,419,667 1,332,143 1,771,800 1,327,738
All our UK sites send zero waste to landfill.
Packaging use
(UK) 2021 2020
Total primary packaging in products sold (tonnes), of which: 62,825 61,667
Total made from recycled and/or renewable materials 51,033 49,054
% from recycled and/or renewable materials 81.2% 79.5%
Total packaging that is recyclable, reusable, and/or compostable 62,726 61,572
% that is recyclable, reusable, and/or compostable 99.8% 99.8%
Packaging use by material
Plastic (tonnes) 20,328 21,032
PE / HDPE / LDPE / LLDPE 319 314
PET, of which: 14,271 14,376
rPET (recycled) 9269 9136
Average recycled content 64.9% 63.6%
PP 5,639 6,247
Laminate films
2
99 95
Average recycled content, all plastics 45.6% 43.4%
Bakkavor does not source PVC or PS (polystyrene) plastic
Paper-based packaging (tonnes) 41,764 39,918
Other primary packaging materials, e.g. aluminium 733 717
1 Meal equivalent based on a 420g portion.
2 As of January 2022, these are now deemed recyclable according to the On-Pack Recycling Label (“OPRL”) scheme as collection facilities for recycling of soft plastics are more
widely available in UK supermarkets.
ESG PERFORMANCE DATA
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Bakkavor Group plc
Annual Report & Accounts 2021
STRATEGIC REPORT
Water use
We are in the process of upgrading our water tracking and measurement procedures. Water consumption data is not yet
available for 2021. We report our consumption and management of water through CDP’s water questionnaire available at
www.cdp.net.
See also: 2020 CDP Forests questionnaire for Timber (paper-based products) available at www.cdp.net.
Carbon emissions and energy use data can be found in the TCFD section on pages 54 to 61.
Sustainable and healthy products (UK)
% UK product
portfolio
Plant-based products 19%
Vegetarian products 50%
Meeting ‘healthier’ criteria (lower in fat, sugar, salt than alternatives)
2
62%
Meeting the Food Standards Agency’s 2024 target for salt 83%
ENGAGEMENT AND WELLBEING IN OUR WORKPLACES AND COMMUNITIES
Group health and safety data
UK 2021
Change
vs 2020 2020 2019 2018
Major
3
accidents per 100k employees 57 +16% 49 41 94
>7 days lost-time accidents per 100k employees 334 +1% 330 254 400
Total accidents per 100k employees 6,260 -5% 6,579 7,726 10,068
CHINA 2021
Change
vs 2020 2020
Major accidents per 100k employees 0 -100% 47
>7 days lost-time accidents per 100k employees 726 +71% 424
Total reportable accidents per 100k employees 726 +19% 612
US 2021
Change
vs 2020 2020
OSHA Recordable incidents
4
per 100k employees 3,368 -64% 9,333
OSHA reportable injuries 0 -100% 1
Our international businesses additionally report health and safety data as per local legislative requirements
to the relevant authorities.
1 We do not currently have consumption or use data for our US business but are implementing processes to measure this in 2022. Intensity ratio is based on
UK and China reported revenue of £1,691.5 million (2020: £1,647.0 million).
2 As per the Department of Health’s UK Nutrient Profiling Model.
3 Number of ‘major’ accidents and specified injuries as defined by the UK Health and Safety Executive.
4 According to definition of the US Occupational Safety and Health Administration (“OSHA”). Employee numbers include agency labour.
TRUSTED PARTNER
CONTINUED
50
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Annual Report & Accounts 2021
Colleague data
The Group employed 18,972 colleagues in total. Almost all colleagues (>99%) are considered permanent.
By location
2021
2020 2019 2018 2017Number % of total
United Kingdom 15,863 84% 16,356 16,942 17,00 4 17,3 4 8
US 875 5% 808 874 635 595
China 2,205 12% 2,125 2,266 2,181 1,628
Continental Europe (Spain, Italy) 29 <0% 29 23 22 22
Total 18,972 19,318 20,105 19,842 19,593
By function
2021
2020 2019 2018 2017Number % of total
Production 15,578 82% 15,938 16,759 16,706 16,653
Management and administration 2,521 13% 2,488 2,424 2,183 1,992
Sales and distribution 873 5% 892 922 953 948
Total 18,972 19,318 20,105 19,842 19,593
By gender
Group 2021 % 2020 2019 2018 2017
Female 8,450 45% 8,654 8,864 8,698 8,389
Male 10,522 55% 10,664 11,241 11,144 11,204
Total 18,972 19,318 20,105 19,842 19,593
UK
5
2021 % 2020 2019 2018 2017
Female 6,626 41.7% 6,906 7,023 7,066 7,125
Male 9,266 58.3% 9,479 9,942 9,960 10,245
Total 15,892 16,385 16,965 17,026 17,370
China
6
2021 % 2020 2019 2018 2017
Female 1,405 63.7% 1,366 1,427 1,352 1,002
Male 800 36.3% 759 839 829 626
Total 2,205 2,125 2,266 2,181 1,628
US 2021 % 2020 2019 2018 2017
Female 419 47.9% 382 414 280 262
Male 456 52.1% 426 460 355 333
Total 875 808 874 635 595
5 UK data includes employees based in Bakkavor Inbound Logistics and procurement offices in Spain and Italy.
6 China includes mainland China and Hong Kong.
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Annual Report & Accounts 2021
STRATEGIC REPORT
Gender pay reporting (UK)
2021 2020 2019
Median gender pay gap 5.1% 2.1% 7.3%
Mean gender pay gap 8.6% 8.2% 10.7%
M F M F M F
1st quartile (lower paid) 51.1% 48.9% 58.8% 41.2% 49.5% 50.5%
2nd quartile 58.5% 41.5% 59.6% 40.4% 59.3% 40.7%
3rd quartile 63.8% 36.2% 58.1% 41.9% 62.5% 37.5%
4th quartile (highest paid) 65.0% 35.0% 67.6% 32.4% 67.5% 32.5%
Median gender bonus gap 15.2% 14.5% 14.9%
Mean gender bonus gap 17.0% 28.1% 13.6%
M F M F M F
Proportion of males and females:
– Receiving a bonus 9.9% 7.8% 9.3% 7.8% 2.4% 2.0%
– In lower pay quartile 51.1% 48.9% 58.8% 41.2% 49.5% 50.5%
– In lower middle pay quartile 58.5% 41.5% 59.6% 40.4% 59.3% 40.7%
– In upper middle pay quartile 63.8% 36.2% 58.1% 41.9% 62.5% 37.5%
– In upper pay quartile 65.0% 35.0% 67.7% 32.4% 67.5% 32.5%
Senior leadership by gender
Group Board Senior Management
1
Management Board Senior Executives
2
Number % Number % Number % Number %
Female 3 27% 4 29% 1 20% 15 42%
Male 8 73% 10 71% 4 80% 21 58%
Total 11 14 5 36
Senior leadership by ethnicity
3
Group Board Senior Management Management Board Senior Executives
Number % Number % Number % Number %
Of white European heritage 10 91% 13 93% 5 100% 31 86%
Director or Executive of colour 1 9% 1 7% 0 5 14%
Total 11 14 5 36
UK employee turnover (%)
2021 2020 2019 2018 2017
Turnover (excluding fixed-term contracts and redundancies) 27.8 17.9 20.9 22.1 22.7
TRUSTED PARTNER
CONTINUED
1 Refers to the definition within the Companies Act 2006 s414C (8)-(10). Data is for financial year.
2 Refers to the Management Board’s direct reports as per the FRC’s 2018 UK Corporate Governance Code Provision 23. Data is for financial year.
3 Reflects the Parker Review methodology and definition of ‘Director of colour’.
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Annual Report & Accounts 2021
* Available on www.bakkavor.com and to all colleagues through the Bakkavor intranet.
** Available to all colleagues through the Bakkavor intranet. Not published externally.
NONFINANCIAL INFORMATION STATEMENT
The following detail sets out where stakeholders can find further non-financial information on each of the key areas
of disclosure as required under the UK Companies Act 2006 sections 414CA and 414CB.
Reporting requirement Relevant policies
Location of further information
in this report
Page
reference
Environmental matters
Deforestation statement
*
Supplier Code of Conduct
*
Sustainability and Innovation
Environmentally Sustainable Sourcing
42 to 44
41
Employees
Code of Conduct
**
Inclusion and Diversity Policy
*
Engagement and Wellbeing 45 to 48
Human rights
Modern Slavery Statement*
Responsible Operations Policy
**
Group Ethical Trading and Human Rights Policy
**
Responsible Recruitment and Employment
Responsible Recruitment and Employment
Supply Chain Human Rights
46
40
Social matters
Code of Conduct
**
Modern Slavery Statement
*
Engagement and Wellbeing 45 to 48
Anti-bribery and corruption
Anti-Bribery and Business Ethics Policy
**
Anti-Bribery and Business Ethics Statement
*
Whistleblowing Policy
**
Charity and Political Donations Policy
**
Anti-Bribery and Business Ethics Policy
Whistleblowing Policy
Charity and Political Donations Policy
53
Data protection
Data Protection Policy
**
Data Retention Policy
**
Privacy Notice
**
Cookie Policy
*
Data Protection Policy 53
Business model
How we create value 10 to 11
Non-financial KPIs
Key performance indicators 28 to 29
HUMAN RIGHTS, ETHICAL TRADING AND RESPONSIBLE
OPERATIONS POLICIES
Bakkavor is committed to doing business in a fair and ethical way. We
actively work at meeting our moral, legal, ethical and humanitarian
responsibilities. Our Ethical Trading and Human Rights Policy and our
Responsible Operations Policy provide the principles and framework
that Bakkavor has adopted to manage this commitment both within
our own operations and in our supply chain. The policies apply to all
Bakkavor’s own operations and the permanent, temporary and
agency colleagues who are employed within them.
See Supply Chain Human Rights on page 40
See Responsible Recruitment and Employment on page 46
WHISTLEBLOWING POLICY
This Whistleblowing Policy applies to the whole Group and provides
a mechanism through which individuals can raise concerns on
illegal, unsafe or inappropriate activities including discrimination or
harassment in the workplace. This policy represents Bakkavor’s
internal procedure and the use of this enables Bakkavor to effectively
address any wrongdoing within the business. It was updated in 2021
to reflect a change of provider, offering information on how to raise an
issue through an independently monitored and confidential reporting
hotline. The Bakkavor service, ‘Speak Up’, is available Group-wide
by Freephone or online 24 hours per day / 365 days per year and in
15 languages. In 2021, we further promoted this channel as a means
of raising concerns on how the COVID-19 policies were being
implemented. Cases logged were investigated thoroughly through local
HR contacts, General Managers and/or Business Directors, as well
as the CPO, Technical Director, General Counsel or the CFO when
relevant. Whistleblowing is also regularly monitored by the Board.
CHARITY AND POLITICAL DONATIONS POLICY
Bakkavor believes in giving back to those communities in which we operate.
Our Charity and Political Donations Policy sets out the ways charitable giving
may be channelled: through monetary and product donations, supporting
our colleagues in their fundraising efforts and advocating skills and
volunteering events, where appropriate. We never use charitable donations
as a means to gain improper influence and all monies given to charity
in Bakkavor’s name are subject to due process. Bakkavor does not give
financial donations or support to political individuals, representatives,
parties or causes in any country in which we operate.
See Local Causes and Community Engagement on page 48
DATA PROTECTION POLICY
Bakkavor recognises that the correct and lawful treatment
of personal data provides for successful business operations.
Protecting the confidentiality and integrity of personal data is a
critical responsibility that Bakkavor always takes seriously. All staff
and business areas are responsible for ensuring compliance with
this policy and are required to implement appropriate practices,
processes, controls and training to ensure compliance. In order
to re-state the importance of data protection and supplement this
policy, Bakkavor has utilised its e-learning platform to roll-out
training on data protection across the organisation in 2021. As part
of its remit, the Audit and Risk Committee this year considered the
adequacy of these arrangements and concluded that the policy was
adequate. See pages 113 to 119.
ANTIBRIBERY AND BUSINESS ETHICS POLICY
This policy, which also includes a Gifts and Hospitality Policy
embedded within it, sets out the highest standards of business
and ethical conduct expected by those who work for and on behalf
of Bakkavor in all its business dealings whether with customers,
suppliers, competitors or other business partners in all the countries
in which Bakkavor does business. Bakkavor takes a zero-tolerance
approach to bribery and corruption and is committed to acting
professionally, fairly and with integrity in all its business dealings
and relationships wherever Bakkavor operates and implementing
and enforcing effective systems to counter bribery and corruption.
Bakkavor requires all employees and third parties to be familiar with
the basic principles of anti-bribery law in order to avoid any actions or
omissions which might infringe those laws. In 2021, Bakkavor rolled
out refreshed training in anti-bribery for all UK colleagues.
Our procurement team assesses our supply chain partners for
corruption and anti-bribery risk through compliance with our
Supplier Code of Conduct (see pages 40 to 41). Implementing these
policies, with the support of Bakkavor’s e-learning platform, has
enabled the business to re-state the importance of vigilance in
identifying any bribery and corruption issues within the business and
across the supply chain, together with greater awareness of reporting
procedures. As part of its remit, the Audit and Risk Committee this
year considered the adequacy of these arrangements and concluded
that the policy was adequate. See pages 113 to 119.
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Annual Report & Accounts 2021
STRATEGIC REPORT
TASK FORCE ON CLIMATE-RELATED FINANCIAL DISCLOSURES
Climate Change and Bakkavor:
Report against the recommendations
of the Task Force on Climate-related
Financial Disclosures (“TCFD”)
In 2021, we formalised our
commitment to reaching Net Zero
across our UK, US and China
operations by 2040, supporting the
outcomes of the Paris Agreement
and the objective to limit global
warming to well below 2ºC. We
continue to develop and refine our
roadmap of actions and targets
towards 2040 in support of this.
Climate change is the single biggest sustainability challenge
facing the world, and it is also a challenge for businesses –
including ours. We recognise that our Group does not operate
in isolation, that we have impacts on the environment and
a part to play in reversing the climate emergency and
supporting the shift towards a low-carbon economy.
Given the importance of the climate agenda, Bakkavor
has taken the decision to voluntarily report against the
recommendations of the TCFD in the current period. The
below section sets out the progress that Bakkavor has made
in 2021 and outlines further actions Bakkavor will take in
2022 to evolve our understanding of climate change and its
impact on Bakkavor. Bakkavor has not reported against the
Listing Rule (Listing Rule LR 9.8.6R) as this is not effective
for the Group until the period ended 31 December 2022.
See our Trusted Partner section on pages 34 to 53
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Bakkavor Group plc
Annual Report & Accounts 2021
The governance structure for climate-related issues in Bakkavor is set out below.
1. GOVERNANCE
NOMINATION AND ESG COMMITTEE
Dedicated Board-committee for ESG matters including climate
change and Net Zero commitment. Debates climate issues
and provides guidance to the ESG Executive Committee as well as
providing recommendations to the Group Board. Met twice in 2021.
Chair: Simon Burke, Non-executive Chairman
Designated Non-executive Director for ESG matters: Umran Beba
AUDIT AND RISK COMMITTEE
Reviewing principal risk, ‘Climate change and sustainability’ and reporting
under TCFD regulations. Ensures climate-related risks are considered
in the Group’s viability assessment and impairment reviews and that
financial reporting disclosures of these risks are fair and balanced.
Considers broader impact across assets, liabilities and future profitability.
Five meetings in 2021, of which one agenda featured climate and ESG.
Chair: Jane Lodge, Independent Non-executive Director
MANAGEMENT BOARD
Oversight of climate-related issues and performance against emissions reduction targets. Receives updates from the
ESG Executive Committee on performance and climate-related risks. Directs strategic implementation of and capital
allocation for energy efficiency and low-carbon projects. On a quarterly basis the Management Board agenda included
climate and ESG matters.
Sponsor: Donna-Maria Lee, CPO
ESG EXECUTIVE COMMITTEE
Reviewing and acting on information and performance on climate and Net Zero-related matters affecting the business.
Provides overall direction of the Group’s Trusted Partner strategy. Working to identify financial resources required to meet
Net Zero commitment.
Comprised of Director and other senior-level experts from Corporate Affairs, Procurement, Technical, Operations,
Legal, Risk, Finance, Commercial and Regional Business Divisions. Met five times in 2021.
Chair: Sally Barrett-Jolley, Head of Corporate Affairs
The ESG Executive Committee has five workstreams
that are involved in activities that support delivery of our
Net Zero commitment. These are a dedicated workstream
‘Net Zero Carbon Emissions’; ‘Finance and ESG Reporting’,
which is tasked with ensuring regular and accurate carbon
footprint reporting; ‘Operational ESG Integration &
Cascading’, which cascades our commitment across our
business; ‘ESG Board Engagement’, which supports Group
Board training on climate issues; and ‘Sustainability Risk
Management and Reporting’, which leads our approach to
understanding climate risk.
Outcomes from the ESG Executive Committee meetings are
reported to the Group Board on a quarterly basis, including
in-year carbon emission forecasts and a review of the
Company’s climate risk assessment (see below). The Group
Board uses specialist advisers on climate and related topics
from time to time. As interim carbon reduction targets on
our Net Zero roadmap are set, Bakkavor will review the
potential linking of performance to incentives and
remuneration for future years.
KEY ACTIVITIES IN 2021
• The ESG Executive Committee was formalised in early
2021 and has ownership of all ESG workstreams. The
Committee met five times in 2021 to share updates and
progress against workstream objectives.
• During the year the Group Board members received
dedicated ESG training led by the Group’s external advisers
which covered climate change, biodiversity, human rights,
plastics and waste. Dedicated ESG training and know-how
sessions will be an annual feature on the Group Board
agenda to ensure Directors continue to develop their
knowledge and expertise in this area. The Group Board
Knowledge and Skills matrix has been expanded to
incorporate a wider range of ESG topics such as climate
change and responsible sourcing and the matrix is used
as a tool to identify key areas of diversity, skill, expertise or
experience that would add to the effectiveness and reach
of the Group Board when considering succession planning
or evaluating Group Board effectiveness.
• The remit of the Nomination Committee expanded to
include ESG matters including climate change and our
Net Zero commitment and it was renamed the Nomination
and ESG Committee.
GROUP BOARD
Accountable for ensuring that climate-related issues are considered insofar as they impact the long-term strategy of the Group.
Provides oversight of progress and implementation of Net Zero commitment. Reviews Group policies and commitments, including
the Net Zero target and KPIs, progress and approach. The Group Board met eight times in 2021 and climate and ESG featured on
the agenda on a quarterly basis.
Sponsor: Agust Gudmundsson, CEO
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Annual Report & Accounts 2021
STRATEGIC REPORT
2. RISK MANAGEMENT
ASSESSING AND MANAGING OUR EXPOSURE TO CLIMATE RISKS
To assess the business’s exposure to climate-related risks
and identify potential opportunities, Bakkavor engaged
specialists, Willis Towers Watson, to conduct a scenario-
driven climate risk assessment. The approach entailed
building scenarios against which Bakkavor’s strategy and
resilience could be stress-tested, following guidance in the
TCFD Guidance on Scenario Analysis for Non-Financial
Companies, then running catastrophe and climate modelling
for physical risks, identifying transition risks and evaluating
them through subject-matter expert interviews. Finally, we
quantified risks where possible using Bakkavor’s Enterprise
Risk Management (“ERM”) rating criteria and other metrics
such as carbon price forecasts where relevant. The outcomes
were reviewed by both the Group Board and Management
Board and are presented below.
Transition risks
The transition risk assessment used scenarios aligned with
projections to keep global warming ‘well below’ 2°c by 2030 in
line with the ambitions of the Paris Agreement and considered
impacts on different geographies and sectors. We have used
a single, medium-term time horizon because the majority
of transition risks are associated with aggressive mitigation
action in the next 10 years. This assumes proactive and
sustained action to reduce emissions over the next 30 years to
build a low-carbon economy and the implications this has on
environmental, social, economic, political, and technological
dimensions. For example, assuming broader technological
investment away from fossil fuels, towards increased energy
efficiency and renewables. Sources informing assumptions
included projections used in Shared Socio-Economic
Pathways (“SSP”), the IEA (Sustainable Development), IPCC
(RCP 2.6) and NGFS Below 2°c Orderly Scenario.
Overall, based on the risk analysis performed, our transition
risk exposure is deemed to be low. This is due to existing
mitigations, such as risk sharing mechanisms for raw materials
price fluctuations and medium-term energy efficiency, and
planned future technology upgrades. However, one transition
risk emerged as ‘moderate’, and therefore, financially material.
This is GHG emissions pricing, which impacts Bakkavor through
increased operating costs due to forecasted carbon pricing.
We have estimated that this risk could potentially increase
the Group’s cost by between £5-10 million p.a. by 2030 (the
medium-term time horizon). Our mitigation against this risk
is directly linked to successful delivery of our Net Zero
commitment and its primary objective of reducing emissions
as far as possible. In developing and refining the roadmap, we
are incorporating considerations around GHG emission pricing,
offset costs as well as capital expenditure planning around
emissions reduction technology investments.
While a number of further transition risks – from increased
raw material costs to changing consumer preferences –
are deemed highly likely, we are well placed to mitigate the
potential negative impacts on the business, and the potential
financial impact from these risks is considered to be low.
The risk assessment also identified some potential
opportunities arising from the transition to a low-carbon
economy. Enhanced emissions-reporting obligations such
as eco- or carbon labelling could support increased
sustainability of our product portfolio, therefore supporting
mitigation of other risks. Further, the transition to lower-
emissions technology could provide an opportunity to deliver
utility savings from increased resource efficiency, and
regarding the changing costs of raw materials, as our
business constantly evolves our product offering to reflect
trends and seasonality, this naturally provides an opportunity
to rebase costing on an ongoing basis. The table below
outlines these risks.
Transition
risk type
Transition risk Description
Policy and
legal
Enhanced emissions-
reporting obligations
Challenge of adjusting to increasing
carbon emissions-related reporting
requirements. Additional operating
costs of required resources to meet
disclosure, including potential product
footprint eco- or carbon labelling.
Climate change
litigation
Increased risk of climate-related
litigation brought by investors,
insurers, shareholders and public
interest organisations.
Building code
requirements
Minor additional costs to upgrade
buildings and sites to meet more stringent
building codes such as EPC regulations
in the UK, covered in ongoing building
maintenance costs and budgeting.
Emissions offset Increased cost of carbon credits required
to offset any residual emissions and
deliver our Net Zero commitment by 2040.
Technology Costs to transition
to lower emissions
technology
Additional costs to support delivery
of Net Zero commitment through
investments in lower emission
technologies in our manufacturing sites.
Market Increased cost of
raw materials
Increased expenditure on raw materials
due to price fluctuations and instability
caused by transition climate risks in the
supply chain.
Changing consumer
preferences
Lower revenues due to not shifting
portfolio offering towards products
that support consumer demand for
lower climate-impact products.
Cost of capital More difficult to access capital as a
result of increased incorporation of
climate change considerations within
credit ratings.
Reputation Investment risk Lower revenue and access to investment
streams as a result of failing to meet
stated ESG ambitions.
Employee risk Operational challenges due to failure
to attract and retain talent as a result
of failing to meet stated ESG ambitions.
TASK FORCE ON CLIMATE-RELATED FINANCIAL DISCLOSURES
CONTINUED
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Annual Report & Accounts 2021
Physical risks
The physical risk assessment looked at the acute and chronic
impacts of climate change. For example, damage to sites
caused by increased frequency and/or severity of extreme
weather events (acute risks) and increased heat and/or
drought stress (chronic risks). We assessed the potential risks
over a medium (2030) and longer-term (2050 and beyond) time
horizon using the Representative Concentration Pathways
(“RCP”) defined by the Intergovernmental Panel on Climate
Change’s (“IPCC”) Fifth Assessment Report (“AR5”),
specifically the ‘best possible’ scenario of ‘well below 2°c’ (at
+1.5°c) RCP 2.6) and ‘worst case’ or ‘hothouse world’ scenario
of RCP 8.5 (4°c). The acute risks are relevant under both
scenarios. The chronic risks are relevant for the 4°c scenario.
Our exposure to physical risk varies across site and
supply chain region due to the differing impacts of climate
on geographic regions. As a business, the assessment
highlighted that we are exposed to chronic and acute risks
in both our operations and supply chain. These include
for example:
Operational level:
• Chronic climate impacts on our operations that could lead to
increased energy consumption and emissions due to higher
cooling demand, increased water stress, reduced labour
productivity and potential logistics disruption.
• Acute risks such as increased frequency of flood events around
our sites that could cause disruption to production, site
damages, increased maintenance, repair and insurance costs.
Supply chain level:
• Chronic climate hazard exposure such as heat stress, drought,
and sea level rise in our supply chain that could lead to decline
in yield for agricultural products and increased costs.
• Increased exposure of key suppliers and supply chain regions
to acute climate risks such as floods and storm events that could
cause supply bottlenecks, shortages, and sourcing disruption.
Acute risks are relevant now and the likelihood and impacts
of these risks increase with the ‘hothouse world’ scenario
of RCP 8.5 (4°c) as well as over time (2050 and beyond). The
chronic risks emerge under the ‘hothouse world’ scenario
from 2050. For both types, the risk is more pronounced in
some regions than others.
To mitigate these risks, we are incorporating these findings
into existing risk management procedures including supply
chain assessments and insurance coverage and this will also
be a factor in determining future capital allocation for the
business. This information is also critical input for ongoing
refinement of our Net Zero commitment and roadmap, which
will include a number of energy efficiency projects as
high-priority areas as ways to maximise utility efficiency and
reduce absolute emissions, as well as support our adaptation
measures to site-specific heat stress and drought.
In addition, our responsible sourcing strategy is designed to
safeguard the resilience of our supply chain. This includes
tools that allow us to understand supplier capabilities and
exposures to environmental risks and work with them to
reduce their risk, as required. For more information on our
responsible sourcing strategy, and 2022 actions that support
our risk mitigation see pages 40 to 41.
KEY ACTIVITIES IN 2021
• In light of the outcome of the climate-related risk
assessment performed, we have updated our
principal risk, ‘Sustainability’, to ‘Climate change and
sustainability’, recognising the increasing importance
of climate change risk to the Group (see page 85).
• In 2021, we further integrated ESG risks within our
broader risk management processes and have mapped
our Trusted Partner issue areas, which reflect our
material ESG issues, to the appropriate principal risk
(see Trusted Partner page 39). This requires principal
risk owners to consider relevant ESG issues when
conducting reviews and assessments of each risk.
• We further developed our responsible sourcing approach
through additional targeted engagement with our direct
suppliers, more on which can be read on pages 40 to 41.
57
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Annual Report & Accounts 2021
STRATEGIC REPORT
3. STRATEGY
Our Group strategy considers how our business remains
resilient and can continue to support our vision, to lead the
way in bringing innovative, great-tasting, freshly prepared
food to people around the world, in a sustainable way.
The approach to the fourth element of our strategy, trust, is
captured in our Trusted Partner ESG strategy. This encompasses
how we assess and implement our sustainability agenda and
is based on our most material ESG issues, including climate
change. The other elements of our Group strategy also support
our response to climate change and our Net Zero commitment.
1
UK: DRIVE RETURNS BY LEVERAGING OUR #1 MARKET POSITION
We use our scale to maximise the potential for our carbon
reduction objectives. For example, in 2021, we launched and
completed a £13.3 million asset finance deal with HSBC to
support the upgrade of our refrigeration systems across
three sites – Sutton Bridge and Boston in Lincolnshire, and
Bo’ness in West Lothian.
Our strategy considers how our business responds
to the increasing demand for products that support more
sustainable and climate-friendly diets. Our category
leadership enables us to continue to be at the forefront
of supporting this dietary shift.
2
INTERNATIONAL: ACCELERATE PROFITABLE GROWTH
IN THE US AND CHINA
Responding to our strong growth internationally in a
resource-efficient way is a clear priority. In expanding and
opening new factories, we invest in state-of-the art equipment
and technology, to ensure sites remain fit for the future,
and support growth in an efficient and sustainable way.
In China, we are responding to the increased demand for
meat alternatives and products supporting sustainable diets.
We have collaborated with plant-based specialists to launch
several new products for our foodservice and retail customers.
In the US, we support our key customers with products that
promote healthier lifestyles, which included the launch of
a range of low-carbohydrate fresh meals for a strategic
customer in 2021, reduce food waste and offer alternatives
to animal proteins.
TASK FORCE ON CLIMATE-RELATED FINANCIAL DISCLOSURES
CONTINUED
3
EXCELLENCE: DELIVER SUPERIOR PERFORMANCE THROUGH
OPERATIONAL EXCELLENCE
The majority of our Scope 1 and 2 carbon emissions come
from energy required for refrigeration, cooking processes and
power for our factories. Therefore, optimising energy use in
these areas, without compromising on food quality or safety,
provides the most significant opportunities for reducing our
carbon emissions.
The majority of the Group’s energy consumption is in the UK
(85%); as a result our energy efficiency actions and innovations
are focused in this region. A central component of our Net Zero
roadmap, our energy efficiency policy and strategy for
managing energy consumption and carbon emissions continue
to be refined in line with the UK Government Industrial
Decarbonisation and Energy Efficiency Roadmaps to 2050. This
is steered by the audits and subsequent recommendations
of the Energy Savings Opportunities Scheme (“ESOS”) audits.
These findings, such as LED lighting, compressed air, hot water
and steam systems and refrigeration control techniques, form
part of our ongoing pipeline of site-upgrade projects and have
a positive impact on our carbon emissions, as well as business
costs and efficiency.
Site-level environmental performance is monitored through
internal UK environmental trackers. These cover energy
consumption and efficiency, water use, waste and food waste
management, as well as progress towards Climate Change
Agreement (“CCA”) emission reduction targets.
4
TRUST: BE A TRUSTED PARTNER FOR OUR COLLEAGUES,
CUSTOMERS, SUPPLIERS AND WIDER COMMUNITIES
Climate change, resource efficiency and emissions is a
material issue within our Trusted Partner ESG strategy,
and delivery against our Net Zero goal is managed through
our ESG Executive Committee and ESG workstreams.
We also address climate change through other issues
within our Trusted Partner strategy, including food waste,
impact of packaging, sustainable product development
and environmentally sustainable sourcing.
Going forward, we will seek to further integrate our ESG
and climate agenda across the business, through, for
example, how we allocate capital in operational projects
and in informing product development.
See Trusted Partner on pages 34 to 53
See Our Group Strategy on pages 22 to 25
See Trusted Partner on pages 34 to 53
58
Bakkavor Group plc
Annual Report & Accounts 2021
1
2
34
5
MEASURE:
Scoping, measuring
and reporting our
carbon footprint
TARGET:
Tracking our
progress
towards
Net Zero
COMMUNICATE:
Reporting and
disclosing
on progress,
engaging
colleagues
FINANCE:
Financing and
resourcing our
climate actions
IMPLEMENT:
Reducing our carbon
emissions through
operational efficiency
projects
NET ZERO
2040
4. METRICS AND TARGETS
BUILDING OUR ROADMAP TO NET ZERO
In early 2021, we formalised our commitment to Net Zero
carbon emissions across the Group’s operations by 2040.
We set ourselves this target, ahead of international agreements,
to galvanise the business around the imperative to act and
support the food industry in leading on this issue.
Since 2018 we have targeted year-on-year improvements
in carbon reduction. Recognising that longer-term planning
is required to meet our commitment, in 2021, we started to
develop our ‘roadmap’ to support our target. This roadmap
will continue to be developed and updated in 2022 and beyond,
as we identify initiatives to meet the overall target. We also
intend to strengthen it with additional medium and longer-
term interim targets, against a baseline to be determined, that
hold ourselves and our business accountable, whilst looking
to include incentivisation towards meeting these targets.
In developing this Net Zero roadmap, we follow IGD’s
recommendations in ‘Building your Net Zero roadmap’ – a guide
for food and consumer goods companies that we supported
the development of. It is based around five elements:
KEY ACTIVITIES IN 2021
• Total energy consumption in the UK decreased 9.0%
compared to 2020. Since 2017, our UK electricity supply
has been sourced through a renewable supply contract,
representing 86.0% of our UK Scope 2 emissions.
• We continued our roll-out of switching to more efficient LED
lighting at all sites. The project will deliver a 55% reduction
in energy use per year when complete in 2022.
• In the US, energy consumption comprised 8% of the Group’s
total energy consumption in 2021. There are upcoming
changes in refrigeration legislation which will require plant
modification, and energy efficiency will be one of the
considerations. There are also site-specific programmes
to challenge and reduce refrigeration demand.
• Our facilities in China contributed 7% of Group energy
consumption in 2021. We completed a wider investment
programme across our China sites which has included
a range of energy efficiency improvements.
This is the fourth year for which Bakkavor is reporting
carbon emissions for the Group, including the US and
China businesses as well as the UK.
Greenhouse gas (“GHG”) emissions for the year to
December 2021 have been measured and reported as
required under the Companies Act 2006 (Strategic Report
and Directors’ Report) Regulations, and the Companies
(Directors’ Report) and Limited Liability Partnerships
(Energy and Carbon Report) Regulations 2018.
The total gross GHG emissions reported include all
Scope 1 and Scope 2 emissions for the Group. This covers
all sites where Bakkavor has full operational control.
Data has not been collected for sites owned by Bakkavor
but leased to tenants as Bakkavor does not have
oversight or control of this energy usage and emissions
data. The Group’s environmental management system is
based on ISO 14001.
Scope 1 emissions are those that directly release GHGs
including fuel consumed by our manufacturing facilities,
offices, warehouses and our vehicle fleet, and releases
of fluorinated gases from our refrigeration plant.
Scope 2 emissions are released indirectly from
our consumption of energy sources (electricity and
cooling streams).
Scope 3 emissions are indirect emissions that are
associated with the operation of the business that
are not under our direct control.
The methodology applied to the calculation of GHG
emissions is the ‘GHG Protocol Corporate Accounting
and Reporting Standard’. An ‘operational control’
boundary has been applied. Carbon factors from Defra’s
UK Government GHG Conversion Factors for Company
Reporting and the International Energy Agency (“IEA”)
database are used to calculate the GHG emissions,
where they are not separately provided by a supplier.
Emissions are reported as tonnes of carbon dioxide
equivalent (tCO
2
e).
Emissions from 2018-2020 have been restated as an
error was identified due to use of an incorrect conversion
factor. This resulted in our Scope 1 emissions being
overstated and therefore the restatement has resulted
in a reduction in the emissions data from 2018-2020 as
disclosed on pages 60 to 61.
The tables overleaf show GHG emissions and total
annual energy for both the Group and Bakkavor Foods
Limited (UK).
Bakkavor also discloses to CDP’s climate change
questionnaire, which can be found on www.cdp.net.
About our carbon emissions measurement
59
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Annual Report & Accounts 2021
STRATEGIC REPORT
TASK FORCE ON CLIMATE-RELATED FINANCIAL DISCLOSURES
CONTINUED
GROUP GREENHOUSE GAS EMISSIONS (FOR THE PERIOD 1 JANUARY 2021 31 DECEMBER 2021)
The tables below show 2021 and prior years’ annual data for GHG emissions for the Group and our UK business (Bakkavor
Foods Limited). Data in prior years has been restated, as during the year we identified the use of an incorrect conversion factor
being applied which overstated our Scope 1 emissions. In addition, other values have been amended to reflect more accurate
billing statements. This has resulted in Group net carbon emissions for 2020 being 141,538 tCO
2
e rather than 154,241 tCO
2
e as
previously reported and likewise for 2019 and 2018 as shown below.
In 2021 we saw a 6.1% reduction in our gross (location-based) carbon footprint (Scope 1 and 2), and a 4.1% decrease in our net
(market-based) carbon footprint. In addition, the carbon efficiency of our production has improved as our intensity ratio (gross
emissions per £million reported revenue) reduced by 10.0% to 92.6 tCO
2
e/£m reported revenue. In the UK, gross emissions
reduced by 14.2% and the intensity ratio decreased 15.6% to 71.8 tCO
2
e/£m reported revenue.
Bakkavor Group
Emissions
2021 Change 2020 2019 2018
Scope 1: Emissions from combustion of fuel and operation
of facilities (tCO
2
e)
UK 70,336 -16.2% 83,926 88,521 84,044
US 11,264 -22.4% 14,515 9,226 5,957
China 17,754 +110.9% 8,418 7,066 7,017
Total Scope 1 emissions 99,354 -7.0% 106,858 104,813 97,017
Scope 2: Emissions from purchased electricity and cooling
(tCO
2
e)
UK 44,012 -10.9% 49,396 57,741 66,484
US 6,495 -14.4% 7,5 83 6,685 5,319
China 23,375 +12.9% 20,708 19,668 15,842
Total Scope 2 emissions (location-based) 73,881 -4.9% 77,687 84,094 87,645
Green tariff (tCO
2
e) 37,544 -12.7% 43,007 50,431 56,900
Total Scope 2 emissions (market-based) 36,337 +4.8% 34,680 33,663 30,745
Total gross emissions 173,235 -6.1% 184,545 188,907 184,663
Total net (market-based) emissions (tCO
2
e) 135,691 -4.1% 141,538 138,476 127,76 3
Intensity ratio (gross tCO
2
e/£m reported revenue) 92.6 -10.0% 102.9 100.2 99.5
Bakkavor Group
Energy
2021 Change 2020 2019 2018
Scope 1 – Energy from combustion of fuel and operation
of facilities including transport (kWh) 352,728,213 -9.9% 391,680,450 380,530,563 358,381,808
Scope 2 – Energy from purchased electricity and cooling (kWh) 265,077,689 -1.7% 269,787,168 275,983,366 275,919,192
Total energy (kWh) 617,805,902 -6.6% 661,467,618 656,513,928 634,301,000
60
Bakkavor Group plc
Annual Report & Accounts 2021
UK GREENHOUSE GAS EMISSIONS (FOR THE PERIOD 1 JANUARY 2021 31 DECEMBER 2021)
Bakkavor Foods Limited (UK)
Emissions
2021 Change 2020 2019 2018
UK Scope 1 emissions from combustion of fuel and operation
of facilities (tCO
2
e) 70,336 -16.2% 83,926 88,521 84,044
UK location-based Scope 2 emissions from purchased electricity
and cooling (tCO
2
e) 44,012 -10.9% 49,396 57,741 66,484
Green tariff (tCO
2
e) 37,544 -12.7% 43,007 50,431 56,900
UK market-based Scope 2 emissions (tCO
2
e) 6,468 +1.2% 6,389 7,310 9,584
Total gross emissions (tCO
2
e) 114,348 -14.2% 133,322 146,262 150,528
Total market-based emissions (tCO
2
e) 76,804 -15.0% 90,315 95,830 93,628
Intensity ratio (gross tCO
2
e/£m reported revenue) 71.8 -15.6% 85.1 88.5 91.0
Total renewable energy consumption (on-site generated), kWh) – – – – –
Total non-renewable energy consumption (kWh) 521,885,147 -9.0% 573,288,445 579,759,118 575,834,160
Total energy consumption (kWh) 521,885,147 -9.0% 573,288,445 579,759,118 575,834,160
Totals may not reflect sum of values shown due to rounding.
SCOPE 3 EMISSIONS
Scope 3 indirect emissions are those associated with the operation of the business that are not under our direct control. These can
range from the production of raw materials, transport of goods to site, disposal of waste, manufacturing of packaging, colleague
commuting and business travel, as well as downstream use and disposal of our products by retailers and consumers. These
are known to be significant contributors to organisations’ overall carbon footprint but especially difficult to quantify, due to lack
of primary data availability and being outside of direct control. In 2021, we started to analyse and assess data availability for
our Scope 3 emissions in more detail in our UK business. We know that the vast majority of our Scope 3 footprint comes from
‘purchased goods and services’ – that is, the carbon footprint associated with the raw materials we purchase, however the
data behind this is currently heavily dependent on secondary sources. Our first priority is to reduce these emissions through
engaging in our supply chain as part of our responsible sourcing workstream, ahead of setting targets, until such time as more
accurate data is available.
61
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Annual Report & Accounts 2021
STRATEGIC REPORT
FINANCIAL REVIEW
We delivered a strong financial performance across
all our regions in 2021, despite unprecedented
challenges in the form of supply chain constraints
and cost inflation. Like-for-like revenue, operating
profit and margins have all progressed when
compared to the prior year, and the pre-pandemic
period of 2019. The increased profitability converted
into a healthy cash performance with operational net
debt lower and leverage at its lowest since the Group
was listed on the London Stock Exchange in 2017.
REVENUE
Reported revenue increased by £78.1 million, or 4.4%,
from £1,793.5 million in 2020 to £1,871.6 million in 2021.
Like-for-like revenue
1
, which is determined after adjustments for
currency movements and the closure of a factory in 2020, was up
6.2%, from £1,775.1 million in 2020 to £1,885.6 million in 2021.
Of the 6.2% like-for-like growth, 5.9% was from volume and 0.3%
from pricing. This reflects a year of recovery in the UK and China,
as sales volumes returned following the easing of COVID-19
restrictions during the period, and due to the impact of the
pandemic on 2020 sales, and of accelerating growth in the US.
UK
In the UK segment, reported revenue increased by 1.6%, or
£25.8 million, from £1,566.6 million in 2020 to £1,592.4 million
in 2021.
Like-for-like revenue, which excludes Alresford Salads, a
business we closed in October 2020, increased by 2.9%, from
£1,548.2 million in 2020 to £1,592.4 million in 2021. Alresford
Salads contributed revenues of £18.4 million in 2020. In the UK,
sales in the first quarter were adversely impacted by lockdown
restrictions, however early signs of recovery became apparent
in March as government restrictions began to ease. This
improvement in sales gathered pace throughout the second
quarter as mobility restrictions were eased further, and the
frequency of shopping visits returned to pre-COVID-19 levels.
In the second half of the year, as shopping habits normalised,
we have seen year-on-year revenue return to pre-pandemic
levels for pizza & bread, desserts and meals. Salads delivered
a strong year-on-year performance from the second quarter
driven by recovery in food-to-go, however remained behind
2019 levels as a result of the continuation of government
guidance to work from home.
Ben Waldron
Chief Financial Officer
We delivered a strong
financial performance
across all our regions in
2021, despite unprecedented
challenges. Like-for-like revenue,
operating profit and margins have
all progressed when compared to
2020 and 2019. Strong conversion
of profits to cash has driven our
reduction in net debt, and leverage
is at its lowest since 2017.
62
Bakkavor Group plc
Annual Report & Accounts 2021
US
In the US segment, reported revenue increased by £33.6 million,
or 22.9%, to £180.1 million in 2021 from £146.5 million in the
prior year. The strengthening of Sterling in the period lowered
reported revenue in 2021 by £12.9 million.
Like-for-like revenue, which is at constant currency, increased
by 31.8%, from £146.5 million in 2020 to £193.0million in 2021.
The US has maintained its strong sales momentum from a
combination of restrictions easing and growth with existing
customers in both traditional grocery retail and online channels.
China
In the China segment, reported revenue increased by £18.7
million, or 23.2%, to £99.1 million in 2021 from £80.4 million
in the prior year.
Like-for-like revenue, which is at constant currency,
increased by 24.6%, from £80.4 million in 2020 to £100.2
million in 2021. The significant growth in China was due to
sales volumes building back to pre-COVID-19 levels, albeit
still slightly down on 2019. The performance was driven by a
steady recovery in our foodservice customers in mainland
China and strong growth in new channels, including office
catering and retail. We also saw good momentum in the
bakery business as it benefitted from our recent capacity
investment and a return to growth in Hong Kong.
EXCEPTIONAL ITEMS
2021
There were no exceptional items to report.
2020
Included within Other administrative costs and Finance costs are
exceptional items, which are adjusted for when determining the
Group’s Alternative Performance Measures, as management
consider that when determining the underlying performance
of the business these items should be disclosed separately by
virtue of their nature or amount. Exceptional items comprise
the following:
£ million 2021 2020
Restructuring, impairment and onerous lease
provision – 21.6
Accelerated amortisation of refinancing fees – 1.7
– 23.3
The Group incurred £23.3 million of costs presented as
exceptional items. The closure of two salads factories in
Alresford and Spalding led to restructuring charges of which
£4.9 million related to cash restructuring costs, with a further
£8.2 million impairment charge in respect of their tangible fixed
assets. Following a review of assets, the Group also incurred a
further impairment charge of £8.5 million in the UK business
for assets that are now either redundant or related to products
that have been discontinued in the year. In addition, the Group
incurred £1.7 million of accelerated amortisation of refinancing
fees following the Group’s refinancing of its core debt facilities
on 18 March 2020.
OPERATING PROFIT
Operating profit increased by £40.0 million, or 64.5%, from
£62.0 million in 2020 to £102.0 million in 2021 with margins
increasing by 190 basis points to 5.4%. In the UK, operating
profit increased from £69.1 million in 2020 to £97.8 million
in 2021. In the US, operating profit increased by £8.3 million
from £0.6 million in 2020 to £8.9 million in 2021. In China, the
operating loss is £3.0 million lower than 2020 at £4.7 million.
The increase in profitability across all three regions is due to
the benefits from the return of consumer demand as COVID-19
restrictions eased and the corresponding increase in volume,
with the US also benefitting from increased volumes as
capacity investments allowed for further growth.
Increasing raw material inflation and the impact of labour
shortages in the UK and US have partially offset the
incremental profit from volume growth in the second half
of the year, and further inflationary pressure is expected
into next year. Whilst the Group incurred significant costs in
the prior year, as the business responded to the COVID-19
outbreak with enhanced health and safety and hygiene
protocols, these controls have remained in place and much
of the cost has continued into 2021. Operating profit also
includes a credit of £3.0 million (2020: £9.7 million) arising
from the reassessment of the need for certain commercial
accruals. During the year, the Group reported a net credit
of £7.2 million (2020: £1.4 million) relating to an insurance
claim for business interruption and damage to assets at one
of its operating sites. The overall increase in operating profit
for the period is after provisions made for short-term
performance bonuses as a result of the improved trading.
There were no exceptional items in 2021 and therefore
adjusted operating profit for this year is the same as operating
profit at £102.0 million. This is an increase of 22.0% from the
£83.6 million adjusted operating profit reported for 2020.
Adjusted operating profit margin increased by 70 basis points
to 5.4% in 2021. The exceptional items in the prior year all
relate to the UK segment with UK adjusted operating profit
increasing from £90.7 million in 2020 to £97.8 million in 2021.
FINANCE COSTS
Finance costs decreased by £3.9 million, or 18.6%, from
£21.0 million in 2020 to £17.1 million in 2021. The costs for
2020 include £1.7 million for the accelerated amortisation of
refinancing fees following the Group’s refinancing of its core
debt facilities during the period. The remaining £2.2 million is
due to a decrease in borrowing costs from lower average debt
levels in the period and the repayment of term loans in the
year. The Group’s cost of bank debt remains at circa 3% per
annum, 50 basis points lower than previously reported
following debt repayments in 2021.
1 Alternative Performance Measures (“APMs”), including ‘like-for-like’, ‘adjusted’ and ‘underlying’ are applied consistently throughout the 2021 Annual Report and Accounts.
The APMs are defined in full and reconciled to the reported statutory measure in Note 36 of the Notes to the Consolidated Financial Statements.
63
Bakkavor Group plc
Annual Report & Accounts 2021
STRATEGIC REPORT
FINANCIAL REVIEW
CONTINUED
TAX
The Group tax charge for the period increased by £14.5 million,
from £10.1 million in 2020 to £24.6 million in 2021. The charge
for the year represents an effective tax rate of 30.2% on profit
before tax of £81.4 million. Excluding exceptional items and the
change in fair value of derivative financial instruments, the
underlying
1
effective tax rate was 29.7% and exceeds the
21.7% underlying
1
rate for the corresponding period last year.
The underlying
1
rate is 10.7% higher than the UK statutory tax
rate of 19%, with 9.7% of the increase relating to the UK
Government’s announcement to increase the corporation tax
rate from 19.0% to 25.0%, which will take effect from 1 April
2023. Whilst this change has no impact on current taxes in the
period, it does affect our UK deferred tax liabilities, as these
were previously provided for at 19.0%. Given the change to
rates has been enacted, the Group has now provided for these
liabilities at a rate of 25.0%, being the rate at which these
liabilities are expected to crystallise. The effective tax rate for
2022 is expected to be slightly in excess of the UK statutory tax
rate and in the range of 20% to 22%.
A reconciliation of the expected tax rate to the effective tax
rate is as follows:
£ million
52 weeks ended
25 December
2021
Profit before tax 81.4
Expected tax at 19.0% 15.5 19.0%
Impact of:
Non-deductible items (1.8)
Adjustment in respect of prior periods 1.5
Losses carried forward not recognised 0.7
Unprovided deferred tax assets now
recognised (0.1)
UK deferred tax rate change 7.9
Overseas tax rates 0.9
Total tax charge 24.6 30.2%
EARNINGS PER SHARE
Basic earnings per share has increased from 5.9 pence for 2020
to 9.8 pence in 2021, reflecting the benefit from higher sales
volumes across the business as COVID-19 restrictions have
eased, as well as increasing efficiencies across our factories.
Adjusted
1
earnings per share, which is calculated before
exceptional items and the change in fair value of derivative
financial instruments, has increased to 10.4 pence for 2021
from 8.7 pence in 2020, reflecting the improvement in
underlying trading in the period. The weighted average
number of shares in issue during both 2021 and 2020
was 579,425,585.
CASH FLOW
Net cash from operating activities, which is calculated before
capital expenditure but after payments for exceptional items,
increased by £55.5 million from £88.5 million in 2020 to
£144.0 million in 2021. The majority of this benefit was driven
by working capital improvements, which was to be expected
given the Group’s negative working capital cycle, combined
with the increase in operating profit for the year. In addition,
tax paid has decreased by £10.0 million following higher
payments in 2020. This was due to changes to UK legislation
that required the estimated tax due for a financial year to
be paid within that period and the cash benefit from the UK
corporate tax super-deduction on investments since April
2021. The Group’s interest paid has also decreased by
£3.5million mainly due to 2020 including £4.2 million of
refinancing fees compared to £0.9 million of fees in 2021.
The interest benefit from lower debt levels was largely
offset by phasing of interest payments.
Net cash used in investing activities decreased by £1.3 million
in the period from £56.2 million in 2020 to £54.9 million in
2021. This was primarily due to lower capital expenditure
in the prior year and the first quarter of 2021 as the Group
delayed investment spend to mitigate against the impact
of COVID-19 restrictions.
£ million
52 weeks ended
25 December
2021
52 weeks ended
26 December
2020
Operating profit 102.0 62.0
Depreciation and other
non-cash items 66.1 87.7
Net retirement benefits
charge less contributions (1.4) (1.1)
Working capital movements 2.4 (22.1)
Interest, share scheme
settlements and tax paid (25.1) (38.0)
Net cash generated from
operating activities 144.0 88.5
Dividends received from
associates 0.7 0.1
Purchases of property, plant
and equipment (net) (55.6) (56.3)
Cash impact of exceptional
items 1.2 3.6
Refinancing fees 0.9 4.2
Free cash flow¹ 91.2 40.1
Free cash flow for 2021, which is the key measure the Directors
use to manage cash flow in the business, was an inflow of
£91.2 million, an improvement of £51.1 million on the prior
year due to the factors set out above.
64
Bakkavor Group plc
Annual Report & Accounts 2021
DEBT AND LEVERAGE
Partly offsetting the £91.2 million of free cash inflow in the
period was the payment of the previously suspended 2019 final
dividend of £23.2 million, an interim dividend of £15.3 million,
£0.9 million of financing fees and £1.2 million in respect of
exceptional items recorded in the prior year. Overall, this has
resulted in a decrease of £39.7 million in operational net
debt during the year to £293.7 million. Leverage (the ratio of
operational net debt to adjusted
1
EBITDA) was 1.9 times at
December 2021 and within the Group’s target range of 1.5
– 2.0 times. The Group’s liquidity position remains strong
with headroom of over £190 million against debt facilities
of £489 million and comfortable headroom against all
financial covenants.
From a debt maturity perspective, on 9 March 2021, the Group
extended the maturity date of £430 million of its core debt
facilities from March 2024 to March 2025. On 1 March 2022
the Group extended the maturity date of £430 million of its
core debt facilities from March 2025 to March 2026. In April
2021 and September 2021 the Group voluntarily repaid £37.5
million of its most expensive debt that was due to mature in
June 2024. The interest margin on this loan was LIBOR+4%.
In November 2021 the Group repaid an additional term loan
of £20 million.
INVESTMENT AND RETURNS
The Group’s return on invested capital¹ (“ROIC”) improved
by 60 basis points from 6.6% at the end of 2020 to 7.2% as at
25 December 2021. This reflects the improved profitability
across the Group driven by the lifting of COVID-19 restrictions
combined with benefits from recent capital investments
being realised, particularly in the US. During 2021 capital
investment was limited in quarter one as projects were
rephased to later in the year due to the COVID-19 restrictions
in place at that time. Thereafter further investment took place
including an increase in ready meals capacity in the US and
in China we completed the development of our new site in
Wuhan and our investment in the replacement site in Xi’an is
underway. In addition, this year the UK has benefitted from
productivity investments in smart technology to improve our
management control and review processes. Over the medium
term, the Group expects to see an improvement in ROIC as
recent investments, including the key development projects,
deliver an increase in returns. The Group also plans to
continue to spend circa 4.5% per annum of reported revenue
on capital investment going forward with a focus on return
enhancing projects.
PENSIONS
Under the IAS 19 valuation principles that are required to
be used for accounting purposes, the Group recognised a
surplus of £37.2 million for the UK defined benefit scheme
as at 25December 2021 (26 December 2020: surplus of
£11.2 million).The increase in the surplus is mainly due to
the liability hedging in place for the scheme.
The Group and the Trustee agreed in November 2020 the
triennial valuation of the UK defined benefit pension scheme
as at 31 March 2019. This resulted in a funding shortfall of
£11.7 million, which will be paid over an agreed recovery
period ending on 31 March 2024, with payments of £2.5 million
per annum.
DIVIDEND
We were pleased to reinstate dividend payments during the year,
and we now propose a final dividend of 3.96 pence per Ordinary
share. This provides a total dividend for 2021 of 6.60 pence per
Ordinary share, and would be an increase of 10.0% on 2019 (no
dividend was paid in respect of 2020). If approved by shareholders,
the final dividend will be paid on 30 May 2022.
CAPITAL ALLOCATION POLICY
The Group remains disciplined in its approach to allocation of
capital with the overriding objective being to enhance shareholder
value. Our capital allocation framework is as follows:
• disciplined capital investment;
• reduce and maintain leverage to within target range;
• a progressive dividend;
• targeted approach to considering inorganic opportunities
that may arise.
Ben Waldron
Chief Financial Officer
7 March 2022
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STRATEGIC REPORT
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STAKEHOLDER INTERACTION
Fulfilling our purpose by building
strong relationships with our stakeholders
OUR APPROACH
HOW WE IDENTIFY OUR STAKEHOLDERS
Through stakeholder analysis, we have clearly identified five
groups of stakeholders that we impact on as well as those groups
that can influence and impact on Bakkavor. We engage these
key stakeholders through a variety of channels, many of which
are tailored for specific stakeholder groups. These include
engagement with representative bodies, one-to-one interactions,
and relevant multi-stakeholder platforms.
In the following pages, we have provided an overview of the
stakeholder groups, their priorities, and the way in which the
Group Board acted with regards to these groups when taking
strategic action and decisions during the year.
GROUP BOARD PERFORMANCE
The following pages comprise our Section 172(1) statement setting
out how the Group Board has, in performing its duties over the course
of the year, had regard to the matters set out in Section 172(1) (a) to (f)
of the Companies Act 2006.
We have also included in the following sections of our Annual Report
and Accounts how we have taken the view of our stakeholders into
account when making key decisions during the year.
• Group Board activities: The key activities of our Group Board are set
out in the Corporate Governance Report, which includes a summary of
the key decisions made and the stakeholders considered. Read more
on pages 99 to 102.
• ESG: ESG is a key priority for us, and our Trusted Partner strategy is
integrated into our decision-making as we care about the impact of our
business on the community and the environment. Progress on our
Trusted Partner initiatives can be found on pages 36 to 37 and see our
TCFD section on pages 54 to 61.
The Group Board has a duty under Section 172 of
the Companies Act 2006 to promote the success of
Bakkavor for the benefit of its members as a whole.
The Group Board decision-making process through the year
has had regard for the interests of our colleagues, our
suppliers and customers and investors, for the impact of our
operations on the community and the environment, and for
maintaining our reputation for having the highest standards
of business conduct.
Among and within our key stakeholder groups we understand
there can be different and sometimes conflicting views. As
part of our engagement, we seek to balance these competing
interests and respond in a way that maximises the value for
all those connected with the organisation.
In 2021, we have updated the way that Group Board papers
are written to ensure that our Section 172 considerations
are clearly considered and recorded. Each Group Board
paper includes a section to ensure the Group Board has
fully considered all relevant stakeholders and the medium
to long-term consequences of its decisions and recorded
the output of this.
SECTION 172(1) STATEMENT
The Group Board is responsible for leading
stakeholder engagement, ensuring that we fulfil
our obligations to those impacted by the business.
We understand that our value creation and the long-term
growth and success of the business are dependent on
engagement with stakeholders, and we must build a shared
understanding and common path forward. We are committed to
ongoing and constructive engagement with our stakeholders to
ensure we incorporate their views and interests when making
decisions across our business activities. As we come out of the
pandemic and face unprecedented industry-wide challenges,
balancing the needs of our stakeholders continues to be an
important and challenging task.
OUR KEY
STAKEHOLDERS
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Bakkavor Group plc
Annual Report & Accounts 2021
We have c.19,000 colleagues located
in 46 sites across the UK, US and China.
WHAT WE HAVE DELIVERED:
WHY WE ENGAGE:
• Our colleagues are the heart of our business, so it is important
to understand what matters to them and ensure we incorporate
their views into our Group Board decision-making.
• We want our colleagues to feel valued so that we can achieve
our vision together.
HOW WE ENGAGE TO BUILD AND MAINTAIN
STRONG RELATIONSHIPS:
• Employee Engagement Survey (“EES”).
• Site and Group Employee Forums.
• Whistleblowing hotline ‘Speak Up!’
• Dedicated workforce engagement Non-executive Director.
• Bakkavor intranet, quarterly colleague magazine (Just Made)
and monthly ESG newsletter.
WHAT MATTERS MOST TO OUR STAKEHOLDERS:
• A safe and inclusive place of work.
• Colleagues’ voice is part of the Group’s decision-making.
• To feel supported and have the opportunity to realise
their potential.
HOW WE ARE RESPONDING:
• We reviewed the results of the EES, and responded to the
feedback by supporting the renewal of the Group’s values, and
also approved a significant investment into two training and
development programmes that were launched in 2021: the
Front-Line Leaders Development Programme and an Executive
Leadership Development Programme.
• During the year, Jill Caseberry was appointed as the Company’s
designated workforce engagement Non-executive Director,
providing colleagues with a direct channel of communication to
an independent champion at Group Board level. Jill attended an
initial session with Bakkavor’s SEFs and GEF to introduce herself
and explain her role. More recently, in February, she met with the
GEF to discuss the alignment of Executive remuneration with the
wider company pay policy.
• We continued to make progress in creating a better place to
work and have taken several steps to support the retention and
recruitment of talent across our business. This included enhancing
our recruitment programme, offering flexible shift patterns,
providing free transport to sites and referral bonus schemes.
We also took the decision, after an in-depth benchmarking of our
factory labour rates across the UK, to implement an out-of-cycle
pay increase to the majority of our factory-based colleagues, as well
as out-of-cycle pay increases across all of our US sites of up to 20%.
• We have made positive progress on inclusion, diversity and
wellbeing during the year. We formalised a Wellbeing Steering
Committee led by our CPO, and our CFO is the Group Board sponsor,
and also convened the I&D Forum, chaired by the Group General
Counsel and Company Secretary.
• Many colleagues from central technical and local sites have continued
to work in close co-operation with regulatory bodies, including the UK
Government and UK Health Security Agency (previously Public Health
England), our colleague site representatives, and trade unions to
consider the views of our stakeholders and help maintain a safe
working environment and adapt our ways of working as the guidance
in relation to COVID-19 has evolved.
• Protecting our colleagues remains a priority. The Group Board
received regular updates on food safety, health and safety and our
technical strategy through the year. In 2021, we continued to adapt
to the changing impact of the COVID-19 pandemic and made
good progress in standardising food safety and health and safety
practices and risk assessments across the business. Where
appropriate, we have also sought to update policies and hold
quarterly technical update meetings with representatives from
the UK, US and China to discuss key issues and agree action plans.
• The investment to integrate all HR systems into one platform,
SuccessFactors, has continued to progress well through the year
and is due to go live in Q1 2022. This will bring standardised
and streamlined HR processes across the business and allow
colleagues easy mobile access to the information they need.
OUR
COLLEAGUES
See Our Vision, Purpose and Values on pages 16 to 17
650
colleagues enrolled on
the Front-Line Leaders
Development Programme
New joiner onboarding
process time reduced by
25%
83%
response rate to our
most recent EES
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Annual Report & Accounts 2021
STRATEGIC REPORT
STAKEHOLDER INTERACTION
CONTINUED
Our customers include UK grocery
retailers, US grocery retailers and
online direct to consumer brands,
as well as international foodservice
brands operating in China.
WHAT WE HAVE DELIVERED:
WHY WE ENGAGE:
• We recognise the importance of building long-term strategic
relationships with our customers through ongoing engagement
and investment.
• By engaging and sharing ideas with customers we can identify
new ways of working together.
• We need to understand the needs of our customers, as well as
the demands of the consumer, to create innovative products and
respond to new trends that create value for our customers.
• To support our mutual business models by a fair and transparent
approach to sharing information, including detail of input costs, and
in some cases the establishment of pass-through mechanisms.
• We can assess consumer satisfaction through regular
engagement with our customers and gaining consumer insight
harnessed from our dedicated insight team, category experts,
market data and consumer and customer research and
feedback, thus ensuring our products are of the highest quality
and meet the required technical and food safety standards.
• To support our customers’ sustainability goals and ambitions
as a trusted partner.
HOW WE ENGAGE TO BUILD AND MAINTAIN STRONG
RELATIONSHIPS:
• Many colleagues across product development, marketing,
commercial and technical functions engage with our
customers daily.
• Online surveys and focus groups.
• Customer audits.
• Working collaboratively on shared ESG priorities.
WHAT MATTERS MOST TO OUR STAKEHOLDERS:
• Ensure responsiveness to customers needs on a timely basis.
• Manage availability of labour and raw materials to help
meet demand.
• Minimise disruption due to COVID-19 and industry-wide
challenges across the supply chain and labour.
• Understand consumers’ needs and leverage our insight
to develop innovative and great-tasting fresh products.
HOW WE ARE RESPONDING:
• Whilst consumer demand remained depressed at the start of 2021
with the country in lockdown, we took the decision to re-engage our
commercial and development teams and work closely with our
customers to develop an exciting pipeline of products to reinvigorate
our categories. Our new product launches have been well received
and included the re-launch of one of our key customers’ salads
ranges, with over 60 new fresh and natural products, the expansion
of our Pizza Express offer by leveraging our multi-category
capability and the re-launch of several hearty new soups,
increasing ingredient quality. We also launched our own brand,
The Delicious Dessert Company, with products in 900 stores
across two strategic customers.
• Despite persisting industry-wide challenges, we have continued
to work collaboratively to ensure our customers’ shelves remain
well stocked with our high-quality products, and to support our
customers with outbound distribution from our factories to stores.
To help manage our own labour requirements, we have, for a small
number of sub-categories, taken the decision to focus on core
ranges to ensure we maintain our customer service levels, and
this has been supported by our customers.
• We have taken several actions to minimise operational disruption
in response to industry-wide supply chain challenges, working
collaboratively with our customers on sourcing raw materials, and
our pricing models mean we are able to pass on the inflationary
impact of key raw materials. Following discussions with our
customers, we are increasing pricing for 2022 in line with our
expectations, which alongside our ongoing efficiency drive, will help
offset inflation in the costs which sit outside of our pricing models.
With inflation pressures expected to persist, and in certain
instances heighten, we expect to continue the dialogue with
our customers around pricing through 2022.
• We have also continued to focus on managing our ranges in specific
categories, ensuring continuity of supply by utilising our strategic
supplier relationships, benefitting from our category procurement
expertise, and we have continued to support our customers who
manage outbound distribution from our factories to stores.
• We have supported our strategic customers’ growth opportunity
in the US with capital investment to enhance capacity, including
investments in ready meals capacity at our Carson and Charlotte
factories. In 2022, we expect to complete our ongoing investment to
enhance our houmous processing capability and capacity at Carson
and to invest to further increase our capacity for ready meals.
• We have supported our foodservice and retail customers in China
and collaborated with plant-based specialists to launch several
new products, supporting the consumer demand for healthier,
more sustainable and lifestyle related products.
CUSTOMERS
>950
number of new products
in 2021
100%
of UK sites AA+ and
A+ BRCGS grade
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Bakkavor Group plc
Annual Report & Accounts 2021
We have well-established supplier
partnerships across a global network
of over 900 suppliers with whom we
collaborate closely, including in areas
such as responsible sourcing and
detailed Brexit-related planning.
WHAT WE HAVE DELIVERED:
WHY WE ENGAGE:
• Being able to source high-quality raw materials is an
important factor in our ability to deliver value and innovation.
• Availability of labour and raw materials helps maintain
the continuity of supply.
• Sourcing in a way that is environmentally sustainable and
ethically sound ensures the integrity of our supply chains
and our responsibilities as a manufacturing partner.
HOW WE ENGAGE TO BUILD AND MAINTAIN STRONG
RELATIONSHIPS:
• Procurement colleagues maintain regular dialogue with
suppliers over email, meetings, workshops, and attendance at
conferences and supplier relationships are built on a foundation
of contractual mutual agreement.
• Our Supplier Code of Conduct sets out our expectations of
our UK suppliers, forming the basis of our responsible sourcing
requirements, including human rights, environmental
sustainability and technical integrity.
• We engage with suppliers on a one to one basis to agree specific
terms of supply, review performance and the requirement for
improvement plans.
• All raw material and packaging suppliers, and agents, are
required to be Supplier Ethical Data Exchange (“Sedex”)
registered and we utilise the Sedex online supply chain
platform which allows us to monitor and assess labour
practices in our supply chain.
WHAT MATTERS MOST TO OUR STAKEHOLDERS:
• Opportunities to improve and innovate to help grow
their business.
• Clarity of forecast requirements and accuracy of delivery.
• A partnership underpinned by trust and transparency.
• Minimising disruption due to Brexit and the COVID-19 pandemic.
• Fair and transparent discussions on movements in input costs
and the input on pricing.
HOW WE ARE RESPONDING:
• We utilised our centralised category procurement structure
(a team of product and supplier experts) and our Bakkavor Inbound
Logistics (“BIL”) centre of excellence for all direct imports to
the UK. We have worked successfully with suppliers globally to
mitigate the impact of COVID-19, Brexit and supply chain disruption
due to labour and raw material shortages, HGV driver availability
and inflationary pressures.
• Sourcing plans continue to be reviewed in order to build further
resilience in our inbound supply chain.
• BIL has provided effective solutions to Brexit related changes,
including a centralised team for customs declarations, end to end
provision of logistics solutions, and EU based consolidation and
cross-docking hub, enabling us to consolidate our EU supplies into
trucks and reduce potential customs and Export Health Certificate
(“EHC”) errors or delays.
• The roll-out of our responsible sourcing strategy has seen the
business evaluate over 500 direct suppliers on environmental,
ethical and integrity issues, and engage directly with suppliers in
aligning their performance to our requirements, as set out in our
Supplier Code of Conduct.
• Our pricing models with customers mean we are able to pass on
the inflationary impact of key raw materials and these mechanisms
are working effectively. For other raw materials, packaging, freight
and labour costs we have been successful in increasing pricing for
2022 in line with our expectations which, alongside our ongoing
efficiency drive and focus on cost control, will help offset inflation
in these costs.
• We continue to work closely with our customers on supply
performance, collaborative buying and cost models.
• We have continued to successfully maintain our operations with
minimal disruption through the COVID-19 pandemic and the
impact of Brexit.
100%
tier 1 UK suppliers engaged
with on environmental and
social issues through our
engagement programme
100%
of our UK business’s direct
suppliers registered with Sedex
100%
sustainable sourcing practices
for palm oil, soy in animal feed
and paper packaging
SUPPLIERS
57%
raw materials sourced
directly from UK suppliers
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Annual Report & Accounts 2021
STRATEGIC REPORT
STAKEHOLDER INTERACTION
CONTINUED
INVESTORS
We recognise the importance of engaging
with all shareholders and prioritise
effective dialogue to ensure that we
capture and embrace feedback relating to
areas of interest and areas of concern, and
to ensure that our obligations are met. We
understand that we have a responsibility
to ensure that our shareholders’ interests
are promoted and we remain committed
to delivering value for them.
WHAT WE HAVE DELIVERED:
WHY WE ENGAGE:
• We want our shareholders to understand our vision and strategy,
so we can demonstrate how we create value.
• We want to have an effective channel of communication with
existing and potential shareholders to understand what is
important to them.
HOW WE ENGAGE TO BUILD AND MAINTAIN STRONG
RELATIONSHIPS:
• Investor meetings and conferences, investor events, ongoing
investor calls and correspondence with the Head of Investor
Relations, CFO, CEO, and the investment community.
• The Chairman, Senior Independent Director and Committee
Chairs are available for direct meetings with shareholders
where required.
• We welcome queries from shareholders via telephone, post, or email.
• Our website (www.bakkavor.com) is regularly updated and
provides a library of all relevant shareholder communications
including the Annual Report and Accounts, results releases and
share price information.
• Annual General Meeting (“AGM”) and one-to-one meetings.
• CDP (formerly the Carbon Disclosure Project) reporting.
WHAT MATTERS MOST TO OUR STAKEHOLDERS:
• Delivering long-term sustainable profitable growth.
• To be kept up to date with the key developments in the business
and the issues we are facing.
• Understand the business’s exposure to climate risks, including
those associated with the transition to a low carbon economy.
HOW WE ARE RESPONDING:
• The Group Board has oversight of the Group’s allocation of capital and in
2021 the Group has demonstrated strong progress with a strengthened
financial position, reduction in debt, reinstated dividend and capital
expenditure focused on capacity enhancements and automation.
• Regular updates are provided by the CFO to the Group Board on
matters raised by shareholders and analysts, as well as updates
on the composition of the Group’s share register.
• Following our financial results, the CEO, CFO and Head of Investor
Relations discussed the Group’s financial performance in meetings
with institutional shareholders and analysts. The key areas of focus
being the impact of COVID-19, labour availability and its impact
on the supply chain, inflationary headwinds, leverage reduction,
dividend and international growth opportunities. These matters are
covered in further detail in the Chief Executive’s Overview on pages
6 to 9, Divisional Overview on pages 30 to 33 and Financial Review on
pages 62 to 65.
• We have sought to enhance our financial results reporting by
evolving our highlights page to more clearly summarise our
financial, strategic and operational performance. We have also
changed our segmental disclosure, with the performance of
the US and China business previously reported together under
‘international’ now shown separately.
• We have increased our engagement on ESG matters; the Group
Board received regular updates on the implementation of our
Trusted Partner strategy, reviewed and approved the creation
of a Group ESG Executive Committee, extended the remit of the
Nomination Committee to include ESG governance and oversight,
and appointed Umran Beba as designated Non-executive Director
on ESG matters and Jill Caseberry as designated workforce
engagement Non-executive Director.
• We enhanced our understanding of our climate risk exposure and
improved disclosure to report on the recommendations of the TCFD,
and have expanded our disclosure to CDP, reporting on Forests and
Water questionnaires for the first time.
• Whilst it was not possible to attend the Company’s AGM in person
in 2021, all shareholders were provided with a facility to submit
questions by email or post in advance of the AGM.
• We received shareholder queries relating to the steps the Group
has been taking to mitigate the impact of COVID-19 and protect our
workforce, along with the financial impact of the pandemic for our
workers. Our responses to these questions can be found on our
website at https://www.bakkavor.com/en/investors/shareholder-
information/default.aspx.
76
meetings with investors and
analysts, including two conferences
1.9x
leverage within
target range
6.60p
per share
total 2021 dividend
70
Bakkavor Group plc
Annual Report & Accounts 2021
We operate from 46 sites across the UK,
US and China covering multiple regions.
We want to act responsibly and be a
trusted partner to our local communities.
WHAT WE HAVE DELIVERED:
WHY WE ENGAGE:
• To be a ‘Trusted Partner’ and maintain our licence to operate.
• To support local economic development by creating jobs and
supporting local services.
• To remain an employer of choice in our local communities,
and attract and retain the best talent.
HOW WE ENGAGE TO BUILD AND MAINTAIN STRONG
RELATIONSHIPS:
• We support local charities, schools, sports teams, and projects
important both to communities and our colleagues through
fundraising, in-kind donations and educational activities.
• We have Group charity partnerships for which we fundraise
with a charity events programme.
• We undertake food redistribution, through FareShare and
Company Shop.
• We provide employment opportunities, including apprenticeships
and graduate placements through an award-winning early
careers programme.
WHAT MATTERS MOST TO OUR STAKEHOLDERS:
• For the business to operate in a safe, responsible, and
sustainable way, and to act with integrity.
• To reduce the impact of the business on the environment
by reducing food waste, carbon emissions and using more
sustainable packaging as high priorities.
• Support local community initiatives and provide economic
opportunities for local people.
HOW WE ARE RESPONDING:
• Our Trusted Partner ESG strategy includes Engagement and
wellbeing in our workplaces and communities as one of its three
focus areas in order to support our ability to deliver value to our
communities. This includes building communities through our sites
supporting local charities, schools, sports teams, vulnerable
people, and projects. Further details can be found in the Trusted
Partner section of this report on pages 34 to 53.
• The Group Board is accountable for ensuring that climate-related
issues are considered in terms of their impact on the long-term
strategy of the Group. It provides oversight of progress and
implementation of our Net Zero commitment and reviews Group
policies and commitments, including the Net Zero target and KPIs’
progress and approach.
• The Group Board has reviewed and considered the Group’s
community initiatives, how we are delivering on these and our
progress in doing so.
• We also have two Group corporate charity partners – Action Against
Hunger and FareShare – as part of a three-year programme
running from 2019 to 2021. In December 2021, the UK business
announced its new charity programme, including a three-year
partnership to support GroceryAid and Natasha Allergy Research
Foundation, as well as the launch of a new matched giving scheme
to support UK site fundraising efforts. In parallel, the Group’s US
business announced its support of four foodbanks local to its sites,
and a matched giving scheme to raise further funds to support
each foodbank.
10.0%
decrease in emissions
intensity ratio (gross tCO
2
e /£m
reported revenue)
>400k
meal equivalents redistributed
to our charities and recycled
more than 21,000 as animal feed
COMMUNITIES
400
tonnes of plastic
packaging removed
200
apprentices in our programme
which was ranked number 1 in
TheJobCrowd’s survey in the
Consumer Goods & FMCG sector
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STRATEGIC REPORT
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RISK MANAGEMENT AND RISKS
RISK MANAGEMENT
PROCESS
OUR RISK MANAGEMENT PROCESS AND FRAMEWORK
IDENTIFY ASSESS MITIGATE MONITOR REPORT &
ESCALATE
key risks the potential impact
and likelihood
using appropriate
controls and other
management actions
the internal and
external environment
for potential changes
to risks and the
continued efficacy of
controls through
a regular review
on risks to the
Regional Risk
Committees, Group
Risk Committee and
A&RC periodically
and escalate risks
in a timely manner
when necessary
72
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Annual Report & Accounts 2021
Our approach to risk underpins the
sustainable delivery of our strategic objectives
Our risk management process is designed
to support the Group as we deliver our
Group Strategy and provide long-term
sustainable value, whilst protecting
the interests of our stakeholders, and
safeguarding our assets including our
colleagues, finances, and reputation.
Our approach
The Group Board is responsible for ensuring the effective
identification and management of key strategic and emerging
risks in the current year and in the future to support the Group
in delivering its strategic objectives. In addition, the Group
Board reviews and approves the ongoing risk management
process. This includes the internal control system, risk
management framework, policies and procedures that outline
what can be considered an acceptable level of risk for an
estimated level of return, underpinned by the setting of the risk
appetite and risk tolerance of the Group on an annual basis.
As part of the Group Board’s activity, we maintain a formal
Risk Register, in accordance with the 2018 UK Corporate
Governance Code (the “2018 Code”). The Risk Register
identifies the principal risks faced by the Group, the likelihood
of their occurrence and the potential impact on the Group, as
well as the key mitigating actions used to address them, with
ownership of each of the principal risks assigned to a Senior
Executive. The Risk Register also outlines how we plan to
minimise future probable risks within the framework of
Bakkavor’s policies and procedures, Code of Conduct and
Business Ethics. The Risk Register is updated on a quarterly
basis and reviewed by the Audit and Risk Committee, and
subsequently the Group Board. All colleagues receive health
and safety and food safety training as part of their induction
to the Group and this training is refreshed.
The Audit and Risk Committee reviews and reports to
the Group Board on the effectiveness of the Group’s risk
management process and internal control system. This is
delivered through review of regular reports received from
the Management Board, Risk Committees and Senior
Executives, in conjunction with the output of internal audit
work performed by our external adviser, KPMG LLP (“KPMG”),
and advice from other internal and external advisers. These
reports provide detail on current and emerging risks that are
relevant to business activity, the effectiveness of internal
controls in dealing with these risks and an update on the
implementation of approved mitigating actions.
Bakkavor Group’s policy is to identify, assess and monitor
the Group’s principal and emerging risks, as well as
managing and responding to the risks appropriately. Our risk
management framework sets out how risks are identified
and managed to support the Group to deliver on its strategic
objectives and incorporates both a top-down approach to the
identification of the Group’s principal risks and a bottom-up
approach identifying operational risks. Where new risks are
identified and/or existing or emerging risks evolve, action
plans are developed or adjusted to mitigate each risk and
include clear allocation of responsibilities and timescales
for completion. The actions chosen to mitigate the risks
will be subject to the appetite for each risk as determined
by the Management Board, reviewed by the Audit and Risk
Committee, and subsequently approved by the Group Board.
Progress towards implementing these plans is monitored
on a timely basis and reported on in the quarterly risk
committee meetings, with the output reported to the Group
Board through the Audit and Risk Committee.
Emerging risks
While not having a significant impact on the business
currently, as part of our risk assessment process the
Group captures and monitors emerging risks, which have
the potential to adversely impact the Group in the future.
Their potential effects on the delivery of our strategy are
considered at all our regular risk reviews using horizon
scanning inputs from both internal and external sources.
During the full-year 2021, the emerging risks identified and
discussed with the Audit and Risk Committee included the
impact of health and wellness trends on consumer demand,
climate change and the longer-term impact of staff shortages.
We will continue to review and develop our action plans to
mitigate the impact of these risks on the Group.
Risk appetite
The Group Board reviews and sets its risk appetite for each
of the principal risks on an annual basis. This helps provide
clear boundaries on the acceptable level of risk and ensures
that our decision-making, to support delivery of our strategic
objectives, takes this into consideration.
The Group’s approach is to minimise exposure to reputational,
financial, and operational risk, while accepting a risk/reward
trade-off in supporting the delivery of its strategic objectives.
As a producer of fresh food, food safety and integrity are of
paramount importance and the Group Board has a low-risk
appetite for risks which may impact this area, with all
practical efforts made to mitigate them. Another area of
low-risk appetite is in relation to health and safety. As a large
employer, ensuring the health and safety of our colleagues is
key, and we take all practical precautions to protect people
during the time they are on our sites and ensure compliance
with laws and regulations.
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RISK MANAGEMENT AND RISKS
CONTINUED
TOPDOWN APPROACH
Identification of the Group’s principal risks
MANAGEMENT BOARD
Reports to the A&RC on the outcomes of the individual regional and corporate risk committee
reports on a quarterly basis.
AUDIT AND RISK COMMITTEE
Reports to the Group Board on the effectiveness of the Group’s risk management process and internal control system.
This is informed by regular reports from the Management Board, risk committees and Internal and External Auditors.
Refer to the Report of the Audit and Risk Committee on pages 113 to 119 for the activities of A&RC in Full-Year 2021.
CORPORATE RISK
COMMITTEE
BOTTOMUP APPROACH
Identification of operational risks, including food safety, health and safety and property risks.
Day-to-day reporting to Senior Executives on key performance indicators and audit conclusions.
SENIOR EXECUTIVES AND OTHER MANAGEMENT
The Risk Register is maintained by the assignment of individual principal risks on the register to Senior Executives whilst they also
manage and monitor their own risks through timely review.
Additional risks, and the evolution in existing or emerging risks, are escalated to their respective risk committees for review. Regular
reports are provided to the Management Board, the A&RC and the Group Board informing on their risk assessment from key functions
such as technical (including health and safety, food safety), HR, finance, legal and IT.
Internal Audit
Report directly to the A&RC. The internal audit plan is agreed
annually, with input and oversight from the Group Head of Risk
and CFO.
Their audits are financial and risk-based, and aligned with the
Group Risk Register, providing assurance and recommendations
on the suitability of and compliance with Group policies and
procedures across risk management, governance, and internal
control processes.
OUR RISK MANAGEMENT PROCESS AND FRAMEWORK
These Committees perform a quarterly review of the Group’s principal and emerging risks outlined in the Group Risk Register
and provide a summary of the changes to the Management Board.
Each Committee is chaired by the Group Head of Risk with senior executive and Management Board representation.
UK RISK
COMMITTEE
US RISK
COMMITTEE
CHINA RISK
COMMITTEE
External financial audit
Report directly to the A&RC. PwC provide independent assurance
over the Group’s financial statements to ensure they are
presented fairly in all material respects and have been prepared
in accordance with the relevant standards and regulations.
Other external parties
Report to Senior Executives. As part of our risk management
process on a day-to-day basis, a number of external parties
perform audits. This includes BRCGS unannounced and
announced audits of food safety across our UK sites and other
subject matter experts across insurance, property, health
and safety and cyber.
GROUP BOARD
Ensures the effective identification and management of key strategic and emerging risks.
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The business takes a measured approach to investment to
minimise risk exposure. Whilst over recent years significant
capital investment has been made in the US and China,
these are markets which Bakkavor has operated within for
many years, and we believe that they represent exciting
opportunities for future growth. There is a trade-off between
risk and reward in making strategic investment decisions,
however we believe the Company is well placed to take
advantage of available opportunities and maximise risk-
adjusted return, whilst minimising the exposure.
All material strategic investment decisions are reviewed
and assessed by the Management Board and the Group
Board. These decisions are supported by detailed analysis
and documentation, as well as expert input as required to
ensure that the risks associated with each opportunity
and its execution plan are well-understood and accepted.
Risk assurance
Risk assurance is delivered using the ‘four lines of defence’,
which comprises; (1) operational management are responsible
for direct assurance at the business level including monitoring
of management controls, key performance indicators and
self-assessment; (2) central functional teams undertake the
development of policies and procedures, training and auditing
the operational teams; and their work is supplemented by
independent audits performed by food safety and health and
safety subject matter experts including announced and
unannounced customer audits, BRCGS food safety audits,
insurance audits and professional property advisers; (3) internal
audits on key risks (outsourced to KPMG); and (4) external
financial audits, performed by our External Auditors PwC.
Internal control system
The internal control system provides the structure and an
ongoing process for risk management. This helps provide
reasonable assurance to Senior Executives and operational
management that processes have been implemented
effectively to manage risk in our operations. It should be noted
that the system is designed to manage rather than eliminate
all risks. This is combined with a central governance
framework which supports the business through Group-wide
policies, procedures and training provided by our central
functions, including technical, finance, human resources, risk,
information systems, legal and procurement. Operational
management are responsible for implementing procedures
and monitoring of controls with key risk indicators. We obtain
independent assurance over the effectiveness of the internal
controls through the performance of audits by the internal
audit team.
Examples of the Bakkavor internal control system include:
• Health and safety – The Group promotes a proactive safety and
accident awareness culture and has in place health and safety
teams that define standards and monitor compliance with the
Group’s policies for ensuring workplace safety.
• Food safety – The Group aims to deliver food products with the
highest levels of safety and integrity. Bakkavor applies food
safety procedures when designing and managing its sites,
including rigorous testing and Hazard Analysis Critical Control
Point management systems.
• Food quality – The Group maintains strict controls regarding
the authenticity, quality and labelling of the products it
manufactures and supplies. Bakkavor is subject to regular
inspection by food safety and other authorities for compliance
with applicable food laws.
• COVID-19 – Our technical and operational teams introduced
new procedures and controls at each of our sites in response
to the COVID-19 pandemic to help ensure the health and safety
of our colleagues, whilst continuing to operate as an important
supplier of fresh prepared food to our grocery retail and
foodservice customers.
• IT systems – Bakkavor has an IT risk and security development
programme in place and during the year has made further
investment in its cyber defences, including the addition of
multifactorial security and the segmentation of our UK local
area networks.
• Treasury – The Group has a Treasury Policy in place, the main
objectives of which are to ensure that appropriate capital
resources are available for the maintenance and development of
the Group’s businesses, and that the financial risk relating to the
Group’s currency, interest rate and counterparty credit exposure
is understood, measured, and managed appropriately.
• Financial reporting – The Group has a robust Business
Control Environment Policy in place which covers key financial
controls which apply to all business units. Financial reporting
is reviewed by finance teams at business unit, sector, region
and Group level.
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STRATEGIC REPORT
5
7
4
8
11
6
3
14
9
13
12
1
2
15
10
RISK MANAGEMENT AND RISKS
CONTINUED
2021 business context
The Group delivered a strong performance in 2021 despite
facing a number of challenges. Whilst the year started with the
acute effects of the government imposed restrictions due to the
COVID-19 pandemic, these lessened through the period leading
to an improvement in consumer confidence and a strong
rebound in consumer demand for freshly prepared food.
The ever evolving risk profile with respective to the COVID-19
pandemic led to changes in health and safety guidance and
our ways of working. In the second half of the year, we, along
with the wider industry, have faced unprecedented challenges
across the supply chain and in the availability of labour, with the
consequential impact of significant inflationary headwinds and
a level of operational disruption. 2021 was also a year in
which tackling climate change has become a key priority for
governments and businesses globally and is an increasing
area of focus for our business.
These developments have had an impact on the overall risk
profile of the Group, and through our full-year 2021 risk
assessment process have resulted in:
• The modification of three of our principal risks descriptions;
• An increase in the risk profile of three principal risks;
• A decrease in four principal risks. The outcome of the principal
risk assessment and year-on-year movements are
summarised in the risk assessment map.
For further detail of the risk description, drivers, mitigations,
and developments in 2021 refer to pages 78 to 86 for detail of
the principal risks and uncertainties.
RISK ASSESSMENT MAP
Principal risks 2021
Likelihood (after mitigation)
Business impact (after mitigation)
See principal risks and uncertainties on pages 78 to 86
1. Consumer behaviour and demand
2. Competitors
3. Strategic growth and change programmes
4. Reliance on a small no. of key customers
5. Food safety and integrity
6. Health and safety
7. Supply chain
8.
Availability, recruitment and retention
of colleagues
9. Brexit disruption
10.COVID-19 pandemic
11. IT systems and cyber risk
12.Climate change and sustainability
13.Disruption to Group operations
14.Treasury and pensions
15.Legal and regulatory
Risk trend
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‘Supply chain’ replaces ‘Raw material
and input cost inflation’
In 2020 our principal risk focused on the
risk of fluctuations in the price and
availability of raw materials, packaging
materials and freight. However, the
well-documented industry-wide supply
chain challenges through full-year 2021
that have resulted from the medium-
term effects of COVID-19 and Brexit have
driven significant inflation and volatility in
the supply of raw materials, packaging,
energy and logistics services. Therefore,
our risk assessment has sought to evolve
this principal risk to encompass the
supply chain risk more broadly, reflecting
both supply chain disruption and inflation.
‘Availability, recruitment and retention
of colleagues’ replaces two separate
risks ‘Labour availability and cost’
and ‘Recruitment and retention of
key employees’
Through 2021, the impact of the
COVID-19 pandemic combined with the
effects of Brexit have heightened the
risks the Group is facing in relation to
our colleagues. As COVID-19 related
government restrictions have eased
there has been an increased demand
for labour, and this is heightening our
labour availability risk. This is also
resulting in inflationary pressure on
pay in order to retain and attract talent.
Further to this, to support the high level
of growth in our international markets,
we are having to step up our recruitment
efforts in the US and China. Therefore,
our updated 2021 principal risk seeks to
combine all three aspects of our talent
management: availability, recruitment
and retention.
In addition, the success of our business is
underpinned by the combined efforts of
all c,19,000 colleagues across the Group,
and we have sought to acknowledge this
in the evolution of our people related
risks this year, recognising that all
colleagues are ‘key’.
‘Climate change and sustainability’
replaces ‘Sustainability’
In 2020 our principal risk recognised the
need to ensure our business is developing
in a sustainable way. We have evolved this
risk to reflect the increasing importance
of climate change risk to the Group.
Through 2021, we have developed our
understanding of the Group’s risk and
exposure to climate change by performing
detailed analysis with the support of an
external adviser.
Overall, in the short term, our risk
assessment indicates the impact is
relatively low but with time this increases
both in terms of transition and physical
risks. This will also be impacted by the
success of actions by governments and
organisations across the world. Full
detail of this is included in the Task Force
on Climate-related Financial Disclosures
section of this report on pages 54 to 61.
Changes to our principal risks
The developments through the year have impacted on the overall risk profile of the Group, and through our 2021 risk
assessment process have resulted in the modification of three of our principal risks to reflect this, as follows:
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CONTINUED
1 2 3
UK: Drive returns by
leveraging our UK
#1 market position
Link to the strategic elements of our Group Strategy
International: Accelerate
profitable growth in US
and China
Excellence: Deliver
superior performance
through operational
excellence
Consumer behaviour
and demand
This risk has decreased year-on-year due to the strong rebound in demand for
fresh prepared food and shopping habits having returned to trends experienced
prior to COVID-19 related government restrictions in the UK. In the US, structural
demand for our products remains strong and whilst in China consumers remain
excited about freshly prepared food, consumer caution remains on when to
return to foodservice outlets due to continued local lockdowns in the region.
Link to Group Strategy
2 41
Description of risk Mitigations Developments in 2021
Changes in consumer demand and food
consumption may impact the Group.
This could be driven by a significant
change to the economy as well as
changes in consumer attitudes, for
instance, sustainability and health.
The Group works closely with its customers to
adapt to changing consumer trends such as dietary
changes, sustainability concerns and the impact
of COVID-19 on shopping habits and to ensure
regulatory requirements are met. We leverage
our deep consumer insight, gathered from market
data analysis, consumer surveys and feedback
and industry reports, to help inform our new and
existing product development pipeline to ensure
we meet our customers’, and ultimately end
consumers’, needs. This is supported by our well-
established global supply chain that provides us
with access to a wide range of ingredients that can
be used to drive innovation in our ranges, and our
responsible sourcing approach provides us with
comfort over the integrity of our supply chain and
the quality of our raw materials.
In 2021 we launched over 950 new products across our
customers, including plant-based products, re-developed
healthier products with lower fat, sugar and salt levels
and relaunched an entire salads range for one of our
strategic customers.
We have become increasingly focused on reducing the use
of plastic in our product packaging, driven by our internal
Packaging Forum, and have continued to make progress
on our ‘remove and replace’ plastic strategy.
We continue to monitor the impact of the COVID-19
pandemic on consumer behaviour and demand for
our products, such as the evolution of flexible working,
and are developing our products to best meet these
changing consumer needs.
Competitors
The risk has stayed the same year-on-year.
Link to Group Strategy
2 31
Description of risk Mitigations Developments in 2021
The Group operates in highly competitive
markets. Increased price competition,
development of new products, operational
and technical developments, and/or other
competitive advantages in our competitors
and/or competitors of our customers could
adversely impact the Group. This could
result in loss of market share of our own
business and/or our key customers.
The Group has well-established, close
relationships with its key customers, underpinned
by deep market and consumer insight, strong
innovation capabilities, multi-level relationships,
high-quality products and category expertise,
strong reputation for food safety and health and
safety, strong service levels and overall scale.
We monitor customer performance and trends
on a regular basis and have joint business plans
in place. The Group remains focused on driving
operational efficiency and streamlining the cost
base to ensure it remains competitive, as well as
implementing operational excellence initiatives to
advance our operational and technical capability.
We have continued to partner with our customers and
worked openly and collaboratively through the challenges
in the year. We have delivered on a strong pipeline of
innovation, with over 950 products launched in 2021. We have
continued to roll-out a new factory reporting system that
provides standardised operational KPIs and supports driving
further improvement, as well as helping us to target future
investments to maximise returns.
The risk has increased
year-on-year
Key to risk level
The risk has decreased
year-on-year
The risk has stayed the same
year-on-year
4
Trust: Be a trusted partner
for our colleagues,
customers, suppliers and
wider communities
PRINCIPAL RISKS AND UNCERTAINTIES
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Strategic growth and
change programmes
The risk has stayed the same year-on-year.
Link to Group Strategy
2 31 4
Description of risk Mitigations Developments in 2021
The delivery of the Group’s strategy
will require significant investment of capital
and resource, and organisational change.
This includes new factory builds, investment
in new capacity and/or capability and
acquisition opportunities across all three
markets. Such investments are made based
on forecast financial returns, which are by
their nature uncertain. There is also a level
of execution risk with any significant capital
project, widespread organisational change,
or acquisition. Future investments will need
to take account of climate change in terms
of acute risks such as flood risk and chronic
climate hazard such as sea level risk, heat
stress (requiring greater cooling in our
factories), drought and changing trends
in consumer demand.
The Group’s Capital Allocation Policy drives the
balance of spend across capital expenditure,
inorganic opportunities, debt reduction and
dividends, to support the delivery of the Group’s
strategic objectives, which the Group Board
and Management Board are heavily engaged in.
We have robust and standardised processes in
place for the evaluation and approval of capital
expenditure, outlined in our Capital Expenditure
Policy. All significant capital investments,
organisational change and acquisition opportunities
are subject to review and approval by Senior
Executives, the Management Board and the Group
Board, with consideration given to the balance
of opportunity, resource and risk profile of each
proposal. Performance of significant projects
is tracked against projected metrics on a timely
basis and reported to the Management Board
and Group Board.
The investment to integrate all HR systems into one platform,
SuccessFactors, has continued to progress well through
the year. SuccessFactors will bring standardised and
streamlined HR processes across the business and allow
colleagues easy mobile access to the information they need.
This will also help support our colleagues’ recruitment
and retention and improve efficiency within the function.
The system is due to go live in the first quarter of 2022.
In the UK, the continued roll-out of a new automated
smart manufacturing system across our UK sites has
progressed well, supporting further improvement in
operational efficiency and helping to mitigate inflationary
pressures. The system is now live in 16 sites and the
remaining seven sites are due to go live in 2022.
In the US, to support the national roll-out of ready meals
with an existing customer, we have invested in our ready
meals capacity in both our Carson and Charlotte sites, which
has gone smoothly and completed in the fourth quarter of
2021. In China, our new replacement site in Wuhan went live
in March 2021, with a very smooth transfer of production
and minimal disruption to customer service. Our Xi’an
replacement site works were delayed by government
limitations on construction in the region, however, building
works were completed in November 2021, with production
expected to be transferred in spring 2022.
Reliance on a small
number of key customers
The risk has stayed the same year-on-year.
Link to Group Strategy
2 31 4
Description of risk Mitigations Developments in 2021
We work with a select number of
customers in each of the markets that
we operate in. In the UK, c.85% of our like-
for-like revenue is with four of the largest
grocery retailers, Tesco, M&S, Sainsbury’s
and Waitrose, with the balance across
other grocery retailers. In the US, 86%
of our like-for-like revenue is from five
grocery retail and online customers and in
China, 62% of like-for-like revenue is from
three large scale western foodservice
customers. As a result, the loss of any of
these customers, significant changes in
commercial terms or reputational damage
could result in a significant impact on the
Group’s results.
The Group has well-established, close
relationships with its key customers, underpinned
by deep market and consumer insight, strong
innovation capabilities, multi-level relationships,
high-quality products and category expertise,
strong reputation for food safety and health and
safety, and overall scale. We operate a strategic
partnership model and focus our resource on our
four largest customers in the UK, with customer
dedicated teams to support and manage the
relationships. The Group invests significant
resources behind maintaining its customer
relationships to drive value and minimise risk.
We have continued to strengthen our key customer
relationships through 2021, supporting them in what has
been a challenging period. We have delivered on a strong
pipeline of innovation in the year, with over 950 products
launched across the Group.
In the UK, we have embedded the commercial and
development restructure that took place in 2020, to better
leverage our operational and customer matrix structure.
This has enabled us to retain our customer focus, whilst
developing an increased category focus, driving efficiencies
and increasing returns.
In the US, we have built on our existing relationships,
expanded our product ranges and increased penetration,
as well as securing the national supply of a range of ready
meals to one of our strategic customers.
In China, we have continued to make progress in entering
new channels, delivering strong sales growth with grocery
retail and office catering customers, thereby supporting
the diversification of our customer base to reduce reliance
on our key foodservice customers.
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CONTINUED
Food safety and integrity
The risk has stayed the same year-on-year.
Link to Group Strategy
2 31 4
Description of risk Mitigations Developments in 2021
We produce a significant volume of food
that is consumed by millions of people
every day. It is our duty to make food that
is both safe, and clearly and correctly
labelled. There are risks that products
may be contaminated either accidentally or
deliberately in the supply chain. The effect
of this could be to compromise the safety
of our products for consumers, adversely
affect consumer confidence and potentially
breach the trust of our customers. It may
also lead to product withdrawal or recall,
resulting in financial and/or reputational
impact on the Group and potential loss or
reduction in business.
Industry leading standards of food safety, including
traceability procedures and processes, are
maintained across the Group and this is overseen
by our strong central technical function. We use
Hazard Analysis Control Point principles at all our
sites to identify and control food safety risks, and
colleagues are trained in these procedures. Each
site has a team of technical/food safety experts who
report and monitor performance against a number
of food safety metrics and measures, and these
are reported to the Management Board and
Group Board on a monthly basis, which includes
explanations of variances and detail of any
significant issues. To ensure compliance, our sites
are subject to regular audits against recognised
global food safety standards by our internal central
technical team, customers, and independent bodies
on both an announced and unannounced basis. We
continue to monitor any emerging issues to ensure
we meet increasing compliance requirements.
The Group also operates robust risk assessment
and management processes across its supply chain.
This includes audits of both new and existing
suppliers, stringent supplier approval processes,
and setting clear expectations through our Supplier
Code of Conduct. Suppliers are required to
demonstrate compliance with the Supplier Code of
Conduct through self-assessment questionnaires
and we seek corrective actions if required.
In 2021, 116 Internal Audits and 61 External Audits were
carried out at our sites, and 154 audits were carried out
on Group suppliers and growers.
Further, allergen management plans have been revised
and training workshops held across the UK sites, which
commenced in July 2021 to aid implementation. There
is an ongoing project with equipment providers to drive
operational and functional improvements in labelling
controls, including upgrading the system to the latest
version of Windows to future proof the system and help
accelerate system set up at the start of production runs.
During the year, all of our direct suppliers to the UK
business were evaluated on environmental, ethical and
integrity issues and we continue to engage directly to
support suppliers in aligning their performance to our
requirements as set out in our Supplier Code of Conduct.
In 2021 a small number were engaged with directly due to
insufficient evidence of compliance with the Supplier Code
of Conduct. We agreed action plans with them and by the
end of the year all suppliers met the requirements.
Health and safety
This risk has decreased year-on-year due to a reduction in levels of the COVID-19 virus
in the population due to the vaccine roll-out and the success of our ongoing COVID-19
controls leading to lower levels of colleague absenteeism and health concerns.
Link to Group Strategy
2 41
Description of risk Mitigations Developments in 2021
We recognise our duty of care to secure
and protect the health and safety of our
colleagues, contractors and visitors.
Failure to maintain appropriate health and
safety across the Group could result in
significant reputational, regulatory and/or
financial impact to our business.
The Group has well-established, strong health and
safety processes and controls in place across all
sites, and this is supported by an established culture
of engagement around accident prevention across
the Group. Health and safety is managed locally
by colleagues at sites, supported by the Group’s
in-house health and safety experts who review
and share standards and best practice, support
implementation of new processes and controls,
and monitor health and safety performance metrics
on a regular basis. Each site reports and monitors
performance against a number of health and safety
metrics and measures, and these are reported to
the Management Board and Group Board on a
monthly basis, with detail of any significant issues
reported immediately.
We have continued to adapt our COVID-19 related controls
and processes to reflect the latest regulations, guidance and
risk profile at each of our sites across our three regions.
We have reduced the total number of accidents in the UK
(per 100k employees) by 4.8%, however, we saw a 1.2%
increase in accident frequency with >7 days lost time and
our major accident rate increased by 16% compared to 2020.
Despite this, we remain well below industry averages.
Our focus on reducing slips and trips in 2021 has seen the
introduction of standardised wellingtons across our UK
sites, providing a boot that offers slip resistance, comfort,
chemical resistance and foot protection. Health and safety
concerns are dealt with effectively and actions are fed back
reflecting the strong culture and focus on health and safety
across the business.
In China, since February, we have implemented the
Environment, Health and Safety (“EHS”) business meeting
(training) system for our mainland factories. To date 10
meetings have been held to share and exchange information
on the four key areas: the use of ascending ladders, limited
space for traffic safety, fire protection and evacuation and
warehouse safety.
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Supply chain
The risk has increased year-on-year due to the combined impact of the COVID-19
pandemic and the implementation of the Brexit withdrawal agreement, resulting in
disruption to the supply chain and shortages in certain raw materials.
Link to Group Strategy
3 41
Description of risk Mitigations Developments in 2021
The Group’s cost base and margin can be
vulnerable to fluctuations in the price and
availability of raw materials, packaging
materials, energy and freight.
The loss and/or interruption in supply from
a major supplier could impact the Group
through disruption in our factory
operations and may result in an impact
on customer service levels.
Failure to supply required volumes and
deliver acceptable customer service levels
could limit revenue growth and increases
the risk of adversely impacting customer
relationships.
Climate change will expose suppliers
to acute and chronic risks which we will
need to understand when allocating
supply programmes and developing our
supply base.
In combination with our strong supplier
relationships and our robust approach to supplier
selection and monitoring, and management
processes, the Group is highly experienced in
maintaining a sophisticated supply chain in an
agile manner. Our centralised procurement team
includes commodity focused specialists and ‘on
the ground’ presence in China, Spain, Italy, United
States of America and South America. They are
focused on achieving the right balance between
price, quality, availability, and service levels, and
manage a robust demand and supply forecast. We
make limited use of forwarding agents ensuring
our direct management of any disruption to
product availability and/or transport.
Agreements with customers are made, where
possible, to account for forward purchasing and
price variations. The Group has several raw
materials cost pass-through mechanisms in place
with its customers, which allow us to recover the
impact of increased costs due to changes in raw
material prices. We also remain focused on driving
productivity improvements across our sites, which
helps to mitigate and offset the impact on margin
of any increases in input cost prices.
For our UK business we source our raw materials
from the UK wherever possible (2021: 57%).
Through the year, we switch suppliers to match
seasonable availability, particularly in the spring
and summer when UK crops are more readily
available, and also aim to dual-source where
possible to reduce reliance on a single supplier.
In 2021, the impact of Brexit trade negotiations, coupled with
the continuing impact of COVID-19, on the demand profile
and availability of raw materials and HGV drivers across the
supply chain, has driven inflationary pressure across all
three regions which has intensified through the second half
of the year.
We have been relatively unaffected by the disruption to
distribution across the industry to date, and we have continued
to work collaboratively with our customers who manage
outbound distribution from our sites to stores. Our raw
material pricing models have remained effective and we have
been successful in increasing customer prices starting from
the fourth quarter in 2021 through to early 2022.
Our procurement, commercial and operational teams
have worked jointly on de-risking projects to help avoid or
offset cost inflation and disruption both in the manufacture
of existing products and to help inform new product
development.
Initiatives have included a review of sourcing plans
(e.g. country of origin or a different supplier), identifying
options for substituting materials by changing product
specifications and the forward purchase of certain input
costs (e.g. electricity).
Our drive for operational efficiency improvements to help
offset inflationary pressures continued. The roll-out of a
new factory management system is on track and in 16 UK
sites, we have made progress in improving energy efficiency
as we installed LED lighting and continued to replace F-gas,
and we have increased our investment in colleague training.
Developments in 2022: At the time of writing, the conflict
in Ukraine is not causing a direct impact to our supply chain
as we do not have significant exposure to the region. There
are potential knock on impacts which may cause certain
European commodities (e.g. wheat) and energy markets
to strengthen. We have forward contracts in place which
provides us with security of supply for up to 12 months.
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STRATEGIC REPORT
RISK MANAGEMENT AND RISKS
CONTINUED
Availability, recruitment,
and retention of
colleagues
The risk has increased year-on-year due to the impact of the change
in government restrictions due to the COVID-19 pandemic in all
three regions. This resulted in labour shortages and inflationary
pressure, and has been exacerbated in the UK by the impact of the
Brexit withdrawal agreement.
Link to Group Strategy
2 31 4
Description of risk Mitigations Developments in 2021
Being able to attract, recruit and retain
talented and committed colleagues,
who understand and respect our values,
is critical to ensuring the Group can
successfully deliver on its strategic
growth objectives.
There is a risk that labour availability and
cost will be affected by political, economic,
legislative and regulatory developments
and this could have an adverse impact
on the Group. In addition, increasing
competition from other similar businesses
and/or local employers could also
reduce the availability of labour and
increase cost pressure.
The Group has strong recruitment processes in
place, which it continually reviews and seeks to
improve to reflect the latest market developments.
This is managed by our central talent team and
supported by regional Heads of HR. Our recruitment
efforts are tailored to the local region and area, with
specific campaigns and focus groups in place. We
seek to offer competitive remuneration and benefits
packages and we are committed to investing in
training and development to upskill our colleagues,
provide opportunities for promotion, and seek
to enhance and upgrade site facilities to make
Bakkavor a better place to work. Our salaried
colleagues are incentivised to drive a reduction in
employee turnover, with one of the two short-term
bonus plan criteria based on a reduction in UK
employee turnover, and this has been in place since
2018. We conduct an annual performance appraisal
process for all salaried colleagues and also
perform an Employee Engagement Survey every 18
months. Where we have temporary vacancies, we
seek to fill them wherever possible through direct
recruitment, but we also use agency labour
providers in some instances, and this provides us
with a short-term solution to managing our labour
and manpower planning.
The Nomination and ESG Committee ensures
plans are in place for orderly succession to the
Group Board, Management Board and Senior
Executive positions and oversees the development
of a diverse pipeline for succession.
We continue to drive operational efficiency to help
manage and mitigate the impact of an increase in
the cost of labour.
For detail of our approach to responsible
recruitment and employment, including modern
slavery, refer to the Trusted Partner section on
pages 34 to 53.
Whilst we experienced a fall in employee turnover during
the periods of restriction due to the COVID-19 pandemic at
the start of the year, the availability and turnover of
colleagues across our business have become increasingly
challenging. This is driven by demand returning rapidly
following the easing of COVID-19 related government
restrictions and changes in immigration law, following the
UK’s exit from the European Union, coming into effect.
Further, as the recruitment and retention of employees has
become increasingly difficult at all levels, this has resulted
in inflationary pressure as employers seek to adjust their
compensation to attract and retain colleagues.
We deployed several initiatives to support the recruitment
and retention of our colleagues, which included increased
flexibility in shift patterns, part time work and working from
home; implemented out of cycle pay rate increases
following detailed benchmarking; referral bonus schemes;
and provided free transport to several UK sites to support
accessibility from local urban areas. We have sought to
mitigate the increase in labour costs through customer
pricing; specifically, in the UK our customers have
supported the wage rates increases implemented in
December 2021, and in the US and China we incorporated
labour costs into our overall customer pricing discussions.
In response to feedback from the most recent EES, we have
refreshed our values and ensured they reflect where we are
today and in the future, and this provides an umbrella under
which our offer sits. We have also increased our investment
in training and development, have been recognised for our
industry leading graduate and apprenticeship programmes
and have bolstered our wellbeing support. Refer to further
detail in the Trusted Partner section on pages 34 to 53.
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Annual Report & Accounts 2021
Brexit disruption
This risk has decreased year-on-year as the Brexit related
changes to come that may impact our business are largely
administrative, and with our experience and mitigations we are
well placed to manage these.
Link to Group Strategy
1
Description of risk Mitigations Developments in 2021
The UK’s departure from the EU and its
associated regulatory changes creates
uncertainty, and a failure to prepare could
result in disruption to Group operations
and impact our ability to supply customers.
Specifically, there continues to be
uncertainty over potential disruption
at ports of entry when final import
regulations are fully introduced and trade
with Northern Ireland is also at risk of
disruption when export protocols are
finalised. In addition, the introduction of
duty payable on the import and export
of products could increase costs and
result in products being de-listed.
The Group has a longstanding Brexit Working
Group in place, supported by dedicated internal
resource as required, which ensures Brexit risks
and issues are identified, and mitigations are
regularly reviewed, including organisational
changes, systems development, customer plans,
stock levels and employee retention. Regular
updates on Brexit risks and issues are provided to
the Group Board and Audit and Risk Committee.
Our Bakkavor Inbound Logistics (“BIL”) team,
based in Southern Spain and Lincolnshire, took
responsibility for all imports to the UK business
from the EU and the rest of the world at the end
of the transition period. Their strong direct
relationships with suppliers and hauliers,
combined with years of experience, mean we are
well-placed to manage and mitigate the impact
of any disruption.
Bakkavor has Authorised Economic Operator
(“AEO”) status in the UK, demonstrating our
professional standards of customs clearance
administration. For exports to Northern Ireland,
we are registered under the UK Trader Scheme so
that no duty is payable on imports to Northern
Ireland, and we utilise the STAMNI attestation
arrangements to avoid the need to complete EHC
on all products containing products of animal
origin (“POAO”). To support exports to the Republic
of Ireland, we are a member of the Groupage
export facilitation scheme, enabling us to group
multiple products of the same type under a single
EHC if required.
We purchase forward currency contracts to
mitigate the extent that Brexit developments cause
volatility and weakening in Sterling-Euro exchange
rates. We also look to source our raw materials
from the UK wherever possible, thereby reducing
exchange rate exposure and also mitigating the
impact of potential disruption at ports of entry.
Refer to further detail of people mitigations and
developments in the ‘Availability, recruitment and
retention of colleagues’ principal risk.
Following extensive preparation and planning, disruption
caused by Brexit has been limited. Continued investment in
our colleagues, processes and procedures, as well as
continuing to engage extensively with our customers and
suppliers, resulted in minimal disruption to both inbound
and outbound supply chains.
BIL and our central procurement team have engaged with
over 200 suppliers around the changes to importing goods
to the UK, resulting in changes to contracting terms. We
have centralised customs declarations through one team,
supported by the recruitment of additional colleagues whom
we trained as customs agents, and trained all UK sites on
customs procedures for receipting goods. We have also
implemented software to interface the BIL Enterprise
Resource Planning (“ERP”) system directly with HMRC’s
systems. All import clearances are now completed
in-house, managing imports from 21 countries. Further, we
have established an additional consolidation warehouse in
Northern Italy, enabling us to consolidate our EU supplies
into trucks and reduce potential customs and EHC errors
or delays.
From an outbound perspective, we have developed a software
application that captures product and supply chain details
to generate the required export documentation required to
export goods to our customers in Ireland. At the beginning
of 2021, new border control arrangements in the Republic of
Ireland did result in some short-term delays but the impact
was limited, and with the support of our customers, we have
rationalised several product ranges to simplify the export
arrangements.
We launched an engagement drive to inform and support
our EU national colleagues across our UK sites in claiming
their right to settled status in the UK ahead of the 30 June
2021 deadline.
The Group remains focused on the further administrative
changes to come, preparing for the introduction of EU export
health certificates and import of Products, Animals, Food
& Feed System (“IPAFFS”) submissions from July 2022.
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Annual Report & Accounts 2021
STRATEGIC REPORT
RISK MANAGEMENT AND RISKS
CONTINUED
COVID-19 pandemic
This risk has decreased year-on-year due to the easing of COVID-19
related government restrictions, as case numbers and the risk
profile of the virus have reduced, thereby lowering absenteeism
and health risk to our colleagues. Restrictions easing has also
supported the strong return in consumer demand for FPF products.
Link to Group Strategy
2 31 4
Description of risk Mitigations Developments in 2021
The COVID-19 pandemic has resulted in
widespread and unprecedented challenges
globally. Whilst the roll-out of vaccines
has progressed during 2021 in the UK, US
and China, there remains the risk of new
variants causing disruption to the markets
we operate in and our own operations. The
presence of COVID-19 in our communities
has affected health, and consequentially
impacts labour availability and
absenteeism. Government restrictions
and guidance restricting the movement
of people, ways of working and social
activities have a negative impact on the
demand for fresh prepared food and
continuation of such measures could
adversely affect our financial results.
Overall, the Group’s financial results
may be adversely affected if we do not
adapt to the changes.
The health and safety of our colleagues remains
a priority for the Group. A number of COVID-19
controls were introduced in 2020, including
restricted visitor access, suspending all travel
unless deemed business critical, a more rigorous
return to work procedure, more frequent cleaning
regimes at touchpoints, additional handwashing
protocols, adhering to the UK Health Security
Agency guidelines for social distancing in our
offices, restrooms, changing and ancillary areas,
thermal imaging for temperature checks, safety
screens for factory workers on the line, as well as
following specific HSA guidance for distancing in
food manufacturing businesses. The Group Board
monitors events closely and evaluates the impact
and approves proposed responses by the
Management Board and Senior Executives.
The Group monitors its financial performance,
capital requirements, cash resources and debt
facilities on a regular basis.
We have continued to adapt and evolve the controls and
processes implemented in 2020 at the height of the
pandemic, to reflect relevant government regulations and
industry guidance. The measures are reviewed as part of
regular audits performed by our central technical team
on health and safety, food safety and environmental areas.
For further information on how we have supported our
colleagues’ physical, emotional and financial wellbeing
refer to the Trusted Partner section on pages 34 to 53.
The Group has strengthened its financial position during
the year and is confident that the cash generation, combined
with liquidity available through the committed debt facilities,
is sufficient to support the Group’s sustainable growth in the
medium term. Refer to the Viability statement on page 87.
IT systems and cyber risk
The risk has increased year-on-year as cyber threats have become
more common and increasingly complex during the COVID-19
pandemic.
Link to Group Strategy
21
Description of risk Mitigations Developments in 2021
Unauthorised access to the Company’s
Information Technology (“IT”) systems could
lead to breaches of data protection and
release of market sensitive information,
which could have a reputational, financial
and operational impact on the Group.
Any breakdown and/or failure in the
Group’s IT infrastructure and/or the
Group’s communication networks,
including malicious cyber-attacks by
third parties, could cause disruption
to the business.
The Group takes a risk-based approach to
managing cyber security. We actively identify
risks and threats, design layers of control and
implement controls to mitigate risk. The approach
balances controls that prevent attacks, detect
events and respond quickly to reduce impact and
includes business continuity planning and testing,
phishing simulation, extended security detection
and response.
We are evaluated independently against leading
industry standards published by the US
Department of Commerce, namely the National
Institute of Standards and Technology (“NIST”)
Cyber Security Framework, and partner with
external expert advisers to actively reduce risks
posed. Information risk and security are mitigated
through delivery of a security programme.
This is managed and recalibrated periodically
to ensure investment and business alignment
are appropriate.
The cyber security threat landscape faced by all organisations
has significantly increased in 2021. The Group has continued
to invest in enhancing our systems, controls and processes
through our security programme, to protect the Group
from cyber-attack and mitigate this risk, with increased
investment in our international businesses through 2021.
Our security programme has seen maturity enhancement
on the following key themes: proactive and robust cyber
defence, supply chain security assurance, improving
security capability maturity internally and through security
partnerships, maintaining rigorous controls and managing
enterprise information risks to acceptable levels, core
infrastructure and application transformation.
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Bakkavor Group plc
Annual Report & Accounts 2021
Climate change and
sustainability
The risk has stayed the same year-on-year.
Link to Group Strategy
2 31 4
Description of risk Mitigations Developments in 2021
Climate change is the most significant
sustainability challenge globally and has
the potential to have a significant impact
on the environment in which we operate.
Addressing climate change and mitigating
the impact has become a key priority for
governments, organisations and
individuals.
There is a risk that the Group may not be
able to deliver on its climate change and
sustainability commitments, which could
have a reputational, financial, legal and
or regulatory impact on the business.
Climate change will increase the cost
of insurance if physical damage to
properties becomes more common.
The Group takes its responsibility to build a
sustainable business seriously. We work
collaboratively on the issues that are most
material to the Group and our approach is
underpinned by our Trusted Partner strategy.
We monitor and report on several non-financial
KPIs including net carbon emissions, food waste,
packaging use, health and safety.
Refer to Trusted Partner section on pages 34
to 53 and Non-financial KPIs on pages 28 to 29.
In 2021 we formalised our commitment to reaching Net Zero
across our Group operations by 2040 and are in the process
of developing and refining our roadmap to support the
delivery of this.
We engaged Willis Towers Watson to perform a detailed
assessment of the Group’s climate change risks. This work
concluded that in the short term, climate change presents
a relatively low level of risk for the business. With time,
however, the financial impact on the business increases as
carbon taxes are forecast to increase, the availability of
certain raw materials in supply regions that may be affected
by climate change may reduce and therefore cause prices
to increase, and consumer demand may change. Given the
importance of the climate agenda, we report against the
recommendations of the TCFD and full details of our climate
risk assessment can be found on pages 54 to 61.
Disruption to Group
operations
The risk has stayed the same year-on-year.
Link to Group Strategy
2 31 4
Description of risk Mitigations Developments in 2021
Catastrophic damage to one or several
of our sites by fire, flood, mechanical
breakdown and/or natural disaster.
Building and property management protocols are
employed and audited in conjunction with our
property insurers. Regular reporting of progress
on recommended site improvements following
site visits encourages prompt resolution.
Each site has business continuity and disaster
recovery plans in place, to ensure identification of
key risks, assessment of key controls, improvement
actions required and preparedness for an event
and detail the procedures to be followed in the
event of a range of different disruptions.
Crisis management training has been developed for our UK
sites. This was launched in September 2021 and training has
commenced for the leadership teams at four of our UK sites
so far.
We carried out audits, with the support of our insurers and
insurance brokers, on nine of our UK sites and two of our
China sites. In the US, we completed fire safety investments
in conjunction with our US insurer at two sites.
We engaged Willis Towers Watson to perform a detailed
assessment of the Group’s climate risk exposure, both
transition and physical risk, and further detail of this can be
found in the TCFD section on pages 54 to 61. The physical
risk assessment covers all our sites worldwide plus those
of our major competitors and is designed to help guide
our ongoing investment plans to avoid disruption due to
climate change.
85
Bakkavor Group plc
Annual Report & Accounts 2021
STRATEGIC REPORT
RISK MANAGEMENT AND RISKS
CONTINUED
Treasury and pensions
The risk has stayed the same year-on-year.
Link to Group
Strategy
21
Description of risk Mitigations Developments in 2021
To achieve our strategic growth objectives, the
Group requires a strong financial position. The
Group has debt facilities governed by financial
agreements, under which the Group is subject
to various financial covenants and information
undertakings. The Group also has sustainability
targets in its core financing agreement.
Breaching of a covenant may impact the Group’s
investment strategy, our ability to maintain
existing and secure future financing and/or be
subject to further restrictions, and the cost of
interest on our debt.
By nature of its global operations and supply
chain, the Group purchases raw materials,
packaging and other indirect supplies in foreign
currencies and therefore the Group is exposed
to changes in exchange rates, which can have
an impact on business results.
The Group has a defined benefit pension scheme
which closed to future accrual in 2011. The
scheme is exposed to movements in interest and
inflation rates, values of assets and increased
life expectancy for scheme members.
The Treasury function operates within a framework of
Group Board approved policies and procedures for
financial risk management including risks for funding,
liquidity, currency, interest rate and counterparty
credit. Our financial results and projections are
monitored on a regular basis, through weekly, monthly
and quarterly reporting and forecasting. This includes
analysis and review of cash flow, liquidity and covenant
performance. We maintain a regular dialogue with our
financial lenders, updating them on the business
performance and latest developments.
The Group has a Currency Hedging Committee that meets
on a quarterly basis to ensure that the Group complies
with its 18-month rolling hedging policy for purchases.
The Hedging Committee sets out the target hedging
rates for the Treasury function for the following quarter
to ensure compliance with the policy is maintained.
The pension trustees are updated on the scheme
performance and funding position on a quarterly
basis. The trustees also review investment manager
performance with independent advisers to ensure that
target performance levels are being achieved and take
appropriate action when required. The defined benefit
pension scheme has hedges in place to mitigate a
large portion of the exposure to inflation and interest
rate movements.
Despite the impact of the COVID-19 pandemic, and
latterly the industry-wide supply chain challenges,
we have continued to operate with significant
liquidity headroom and reduced net debt by £39.7
million, with leverage of 1.9 times now within our
medium-term target range. Correspondingly, due
to lower average debt levels in the period, interest
costs have reduced. This also reflects the Group’s
voluntary repayment of £37.5 million of its most
expensive debt. The Group extended the maturity
date of £430 million of its core debt facilities from
March 2024 to March 2025.
The Group has maintained its 18-month rolling
hedging policy for purchases.
The pension trustees have made changes to the
investments held to ensure that target investment
returns are achieved but the overall risk profile is
also lowered. This resulted in the surplus in the
scheme at the end of 2021, under IAS 19 valuation
principles, increasing to £37.2 million from £11.2
million at the end of the prior year.
Legal and regulatory
The risk has stayed the same year-on-year.
Link to Group
Strategy
21
Description of risk Mitigations Developments in 2021
The Group is subject to a wide range of
legislation, regulations and codes of practice
across the geographies in which we operate.
They cover many aspects of our business
including food safety, health and safety, data
privacy, competition, ethical business, tax, and
financial reporting. Failure to comply with
local laws or regulations, or breach of internal
policies and standards, could impact our
reputation, result to financial penalties and
cause operational disruption.
Senior Executives monitor relevant laws and
regulations to ensure compliance across legal,
financial, tax, HR, food safety, health and safety, and
environmental matters. Our internal auditors provide
assurance on our risk management framework.
Key Group policies are reviewed and updated on an
annual basis by the Group Legal team. These Group
policies contain guidance on our standards and
procedures. The Group has an internal e-learning
compliance programme in place which seeks to raise
awareness of key risk areas for the Group and reinforce
know-how and practice within the business, and this
is undertaken on an annual basis. This training is
supplemented by an additional programme of external
legal and governance training for relevant operational
parts of the Group.
In 2021, Group Legal launched a refresher
e-learning training on anti-bribery and corruption
and data protection for all salaried colleagues.
Group Legal facilitated additional training
workshops for key stakeholders in Commercial,
Procurement, Information Security and HR on UK
GDPR, intellectual property and employment via
our external legal advisers.
An I&D Forum was established at the beginning of
2021 to formalise our governance and support the
delivery of our objectives in this area. The forum
has organised a broad range of Group-wide and
site focused events through the year.
Group Legal organised ESG governance and
oversight know-how and training for the Group
Board and Management Board.
86
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Annual Report & Accounts 2021
VIABILITY STATEMENT
In line with Provision 31 of the 2018
UK Corporate Governance Code, the
Directors have carried out a thorough
review of the prospects of the Group
and its ability to meet its liabilities
through to at least the end of
December 2024.
The business operates in a fast-
moving sector with a high number
of products introduced each year.
The Group has to adapt to meet the
changing needs of customers and
consumers; therefore, the Directors
have concluded that a three-year time
frame is an appropriate period for this
assessment, as this is the period over
which the Directors can realistically
set the strategic plan for the Group.
The Directors have assessed the
principal risks to the business and
the key mitigating actions used to
address them within this three-year
time frame. For each of the principal
risks, action plans have been
developed to mitigate the risk with
a clear allocation of responsibilities
for mitigation and the timescales
for completion.
Whilst all the risks identified,
including food safety and integrity,
could have an impact on the Group’s
performance, the specific risks which
could potentially impact the Group’s
financial position include further
lockdown restrictions as a result
of COVID-19, raw material inflation and
higher labour costs due to scarcity of
labour. In addition, the high level of
inflation across the cost base would
need to be recovered through price
increases agreed with our customers,
which in turn could result in retail price
inflation which could then lead to lower
sales volumes.
On 18 March 2020, the Group refinanced
existing debt facilities of £410 million
with £455 million of facilities that
mature in March 2024 on similar terms
to those in place under the previous
financing structure. In February 2021,
the maturity of £430 million of these
facilities was extended to March 2025
and on 1 March 2022 the maturity was
further extended by 12 months to March
2026. In addition, at the end of 2021,
the Group had £34 million of other debt
facilities that will be repaid on an
amortising basis by June 2028.
As part of our annual strategic planning,
the Group prepares a detailed financial
model which forecasts the Consolidated
Income Statement, Balance Sheet,
Cash Flow, covenant performance and
liquidity requirements of the Group for a
three-year period. A downside scenario
that is severe, but plausible, has been
modelled taking account of the potential
financial impact of the specific risks
outlined above, including further
COVID-19 restrictions and the potential
impact of further raw material inflation
and an increase in labour costs and the
resultant impact on sales volumes.
The downside scenario model showed
that even without taking any mitigating
actions that would be available to the
Group if such a scenario occurred, the
Group would not breach the financial
covenants in its bank facilities
agreement and would have significant
liquidity headroom available.
Beyond the three-year timeframe
of this viability statement the Group
would face transition and physical
risks as a result of climate change, as
set out on pages 54 to 61. The Group
has a relatively low exposure from the
transition to a low carbon economy
and at this stage we do not expect the
transition and physical risks to have
a material impact on the business.
Having taken account of the
sensitivity analysis and downside
scenario modelling and the availability
of adequate financing facilities, the
Directors consider that the Group will
be able to continue in operation over
the three-year period to the end of
December 2024.
The Group’s formal viability statement
is set out on page 146.
Our 2021 Strategic Report, from the inside front cover to page 87, has been reviewed and approved by the Board and signed
on its behalf by Agust Gudmundsson.
Agust Gudmundsson
Chief Executive Officer
7 March 2022
87
Bakkavor Group plc
Annual Report & Accounts 2021
STRATEGIC REPORT
Chairman’s Letter
on Corporate Governance 88
Corporate Governance
Compliance Statement 91
Group Board 94
Management Board 97
Corporate Governance Report 98
Report of the Nomination and
ESG Committee 108
Audit, Risk and Internal Control 112
Report of the Audit and Risk Committee 113
Directors’ Remuneration Report 120
Directors’ Report 142
Statement of Directors’ Responsibilities
in Respect of the Financial Statements 147
88-147
CHAIRMAN’S LETTER
ON CORPORATE GOVERNANCE
GOVERNANCE
DEAR FELLOW SHAREHOLDERS
On behalf of the Group Board, I am pleased to present to you
our Corporate Governance Report for the year ended 25
December 2021. This report sets out how we have complied
with the 2018 UK Corporate Governance Code (the “2018 Code”)
and our compliance statement is set out on page 91. The 2018
Code was published in July 2018 and applies to Bakkavor with
effect from 2020. The full text of the Code is available on the
Financial Reporting Council’s website, www.frc.org.uk.
CHANGES TO OUR GROUP BOARD
Over the last 12 months we have continued to strengthen the
membership of our Group Board, increasing diversity and
ensuring we have the right balance of skills, knowledge and
experience. I was delighted to welcome Jill Caseberry who
joined the Group Board in March 2021 as an Independent
Non-executive Director and a member of the Remuneration
Committee. Jill’s responsibilities further increased in the year,
and she was appointed as the Company’s designated workforce
engagement Non-executive Director and a member of the
Nomination and ESG Committee in August. For further
information about Jill’s engagement with the workforce, please
see page 103. I was equally delighted to welcome Sanjeevan
Bala in August 2021 as a new Independent Non-executive
Director and a member of the Audit and Risk Committee.
OPERATION OF THE GROUP BOARD
We have continued to adopt a hybrid approach to our meetings,
with a combination of in-person and online meetings using
video conferencing technology, due to ongoing COVID-19
measures that have restricted international travel for certain
members of the Group Board. Whilst not a substitute for
in-person meetings, this has enabled us to maintain effective
governance and focus on the delivery of the Group’s strategy.
I was, however, very pleased to be able to see everyone in
person at our Group Board meeting in November.
During the year, a review of the effectiveness of the Group
Board and Committees was undertaken. The evaluation
process was internally facilitated by our Company Secretarial
team and consisted of a questionnaire that was completed by
each of Bakkavor’s Group Board and Committee members.
Bakkavor Group plc
Annual Report & Accounts 2021
88
The evaluation results were discussed at the Group Board
and Committee meetings, and next steps were agreed. I am
pleased to confirm that the review found that the Group Board
and its Committees continue to perform effectively. Further
details of this and information on how we progressed the
actions from the 2020 external evaluation can be found on
page 107 of this report.
GROUP BOARD ACTIVITIES
The Group Board’s focus during the year has been on
strategically significant matters, including:
OUR BUSINESS PERFORMANCE
In a year of evolving COVID-19 related government restrictions
and unprecedented industry-wide challenges across the
supply chain and in labour availability, significant decisions
and adjustments continued to be made by the Management
Board with the oversight and support of the Group Board.
The Group Board is extremely proud of our colleagues’
continued support, commitment, and determination during
what has continued to be a difficult period.
ESG
The Group Board takes its responsibility to build a sustainable
business seriously – for our colleagues, customers, investors,
suppliers, communities, and all the consumers that choose
our food. The expectations of investors and other stakeholders
in this area have noticeably increased over the last year. Our
ESG section, Trusted Partner, of the Strategic Report on pages
34 to 53 explains in detail the progress the Group has made
and the steps it is taking to tackle climate change and
sustainability challenges in our business.
The Group Board has
continued to focus on
consolidating our corporate
governance framework to align
ourselves with best practice, enabling
us to deliver our strategy for the long-
term benefit of all our stakeholders.
Simon Burke
Chairman
Governance structure
Simon Burke
Non-executive Chairman
Ben Waldron
Chief Financial
Officer
Denis Hennequin
Senior Independent
Non-executive Director
Umran Beba
Independent
Non-executive Director
Patrick L. Cook
Non-independent
Non-executive Director
Jane Lodge
Independent
Non-executive Director
Agust Gudmundsson
Chief Executive Officer
Mike Edwards
Chief Operating Officer,
UK
Sanjeevan Bala
Independent
Non-executive Director
Jill Caseberry
Independent
Non-executive Director
Lydur Gudmundsson
Non-independent
Non-executive Director
Pete Laport
President, Bakkavor USA
Donna-Maria Lee
Chief People Officer
MANAGEMENT BOARD
Annabel Tagoe-Bannerman
Group General Counsel and Company Secretary
Agust
Gudmundsson
Chief Executive
Officer
Ben Waldron
Chief Financial
Officer
Mike Edwards
Chief Operating
Officer, UK
GROUP BOARD
GOVERNANCE
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During the year, we have strengthened the Group’s governance
of ESG, and expanded the remit of the Nomination Committee
so that it monitors the execution of the Trusted Partner
strategy, oversees the communication of the Group’s Trusted
Partner activities with its stakeholders, and provides input
to the Group Board and other Group Board Committees on
Trusted Partner matters as required. Subsequently, the title
of the Committee was changed to the Nomination and ESG
Committee to reflect this change. In addition, Umran Beba
has taken on the role of designated Non-executive Director
for ESG matters and feeds back to the Group Board meetings
on all ESG matters and the oversight of the execution of the
Group’s Trusted Partner strategy.
I am pleased that this year we have reported in line with the
Task Force on Climate-related Financial Disclosures (“TCFD”),
which has strengthened our governance as well as our
commitment to disclosing our climate-related risks in a more
transparent way. Our TCFD section is on pages 54 to 61.
DIVIDEND
The Group Board paid an interim dividend of 2.64 pence per
Ordinary share on 15 October 2021 to shareholders registered
on the record date at 17 September 2021 and will propose
a final dividend of 3.96 pence per Ordinary share at the
Company’s AGM on 25 May 2022. This will result in a total
dividend for the financial year 2021 of 6.60 pence per
Ordinary share.
Going forward, the Group Board expects to maintain a
progressive dividend policy over the medium term and
the interim dividend to comprise approximately 40%
of the total annual dividend.
ENGAGING WITH OUR STAKEHOLDERS
The Group Board’s focus during the year was to accelerate
Bakkavor’s pursuance of its strategic priorities, while
managing the ongoing uncertainties associated with COVID-19,
Brexit, labour availability and raw material inflation.
The Group Board is responsible for leading stakeholder
engagement, ensuring that the Company fulfils its obligations
to those impacted by the business, in line with Section 172 of
the Companies Act 2006, which helps to underpin the good
governance which is at the heart of the Group Board’s
activities. Details of how the Group Board met its obligations
in respect of Section 172 during the year, by taking account of
shareholder and wider stakeholder interests in its strategic
planning and decision-making processes, are set out on
pages 66 to 71.
CHAIRMAN’S LETTER
ON CORPORATE GOVERNANCE
CONTINUED
AGM
I am pleased to confirm that this year’s meeting will be in
person and by webcast, albeit we are keeping arrangements
relating to the AGM under review as COVID-19 health guidance
evolves. Shareholders will be notified by the Company
beforehand of the revised arrangements via its website and by
a Company announcement. The Group Board therefore
recommends that you check the Company’s website regularly
and monitor Company announcements for any updates. The
Group Board considers the AGM to be an important
opportunity to engage with our shareholders.
LOOKING AHEAD
The governance priorities for 2022 include continued
stakeholder engagement and oversight of the actions being
taken by the Management Board to mitigate the impact to
the business of ongoing industry-wide challenges across
the supply chain and the tightening of labour availability.
We will also be focused on monitoring progress against
our sustainability targets.
Simon Burke
Chairman
7 March 2022
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CORPORATE GOVERNANCE COMPLIANCE STATEMENT
The Company applied the principles of the 2018
UK Corporate Governance Code (the “2018 Code”).
Available from www.frc.org.uk.
Except as outlined below, the Group Board believes that the
Company complied with the provisions of the 2018 Code for
the period ended 25 December 2021.
PROVISION 11 GROUP BOARD COMPOSITION
At the beginning of the year, the Company was not
compliant with Provision 11 of the 2018 Code, as less than
half of the Group Board, excluding the Chair, was made up
of Independent Non-executive Directors. As a result, the
Group Board lacked the appropriate balance of Executive
and Independent Non-executive Directors.
The Company announced on 25 February 2021 the appointment
of Jill Caseberry as an additional Independent Non-executive
Director and a member of the Remuneration Committee with
effect from 1 March 2021. Jill Caseberry was appointed as the
Company’s designated workforce engagement Non-executive
Director and a member of the Nomination and ESG Committee
with effect from 13 August 2021.
The Company announced on 6 July 2021 the appointment
of Sanjeevan Bala as an additional Independent Non-
executive Director and a member of the Audit and Risk
Committee with effect from 1 August 2021.
Following these appointments, the Company has achieved
the required balance of Executive and Independent
Non-executive Directors required under this provision.
PROVISION 32 REMUNERATION COMMITTEE COMPOSITION
At the beginning of the year, the Remuneration Committee
comprised two Independent Non-executive Directors. The
Company announced on 25 February 2021 the appointment
of Jill Caseberry as an additional Independent Non-executive
Director and a member of the Remuneration Committee
with effect from 1 March 2021. Since the appointment, the
Company has been compliant with this provision.
PROVISION 38 PENSION CONTRIBUTION RATES
The Remuneration Committee gave detailed consideration to
the provisions of the 2018 Code in respect of the alignment of
pension contribution rates for Executive Directors with those
available to the workforce. As set out in Provision 38 of the
Code, the pension contribution rates for Executive Directors
should be aligned with those of the workforce. The CEO and
CFO’s pension contribution rates are workforce aligned,
and while the COO’s pension remains higher temporarily,
the Directors’ Remuneration Policy which was approved by
99.72% of shareholders at the 2020 AGM has provided a firm
commitment that the COO’s pension contribution will reduce
to the workforce rate by the end of 2023 (being 12 months later
than guidance given by some UK institutional shareholders).
As set out in detail in last year’s Annual Report and Accounts,
the extension of the COO’s higher pension contribution
achieves workforce pension alignment within a reasonable
period of time and ensured the COO’s fixed pay was not
reduced upon being promoted to the Group Board.
The CEO’s pension contribution has been reduced from 15%
of salary to 3% of salary from 1 February 2021 and well in
advance of current guidance to reduce by the end of 2022.
PROVISION 41 WORKFORCE ENGAGEMENT ON ALIGNMENT OF
EXECUTIVE REMUNERATION AND WIDER COMPANY PAY POLICY
The Remuneration Committee has considered the new
provisions in the 2018 Code with regards to consulting
with colleagues. The designated workforce engagement
Non-executive Director, Jill Caseberry, had two sessions
with Bakkavor’s GEF to talk to members and ensure that
the ‘colleague voice’ is heard in the boardroom. The first
session in July 2021 was an introduction to Jill Caseberry
and to explain her role as designated workforce engagement
Non-executive Director which was conducted via video
conference. The second session, postponed from late 2021
(due to COVID-19 restrictions) until February 2022 in order
to take place face to face, was focused on the alignment of
Executive remuneration with the wider company pay policy.
Other topics covered at the session included an overview
of corporate governance; the role of the Remuneration
Committee; getting senior reward right; how Executive
remuneration packages work; and a ‘Q&A’ session. It was
well received by our colleagues and was considered to be
an engaging, informative and successful session.
The Remuneration Committee, therefore, did not engage
with the workforce in 2021 in relation to the alignment of
Executive remuneration with the wider Company pay policy
(though now covered in February 2022). It was therefore
not compliant with Provision 41 in 2021.
PROVISION 17 NOMINATION AND ESG COMMITTEE COMPOSITION
At the beginning of the year, the Nomination and ESG
Committee comprised two Independent Non-executive
Directors and one Non-independent Director, while the
search for an additional Independent Non-executive
Director was being undertaken. The Company announced
on 25 February 2021 the appointment of Jill Caseberry as
an additional Independent Non-executive Director and Jill
was appointed as the Company’s designated workforce
engagement Non-executive Director and a member of the
Nomination and ESG Committee with effect from 13 August
2021. Since the appointment, the Company has been
compliant with this provision.
PROVISION 24 AUDIT AND RISK COMMITTEE COMPOSITION
At the beginning of the year, the Audit and Risk Committee
comprised two Independent Non-executive Directors, while
the search for an additional Independent Non-executive
Director was being undertaken. The Company announced
on 6 July 2021 the appointment of Sanjeevan Bala as an
additional Independent Non-executive Director and a
member of the Audit and Risk Committee with effect from
1August 2021. Since the appointment, the Company has
been compliant with this provision.
Our compliance with key areas of the Code is summarised overleaf.
GOVERNANCE
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THE GROUP BOARD Chaired by Simon Burke
Collectively responsible for promoting the long-term sustainable success of the Group. Its role is to lead and direct the Group by setting the purpose
and strategy of the Group, overseeing management, and monitoring and assessing culture. Its focus is to ensure the long-term sustainability of the
business, for the benefit of colleagues, customers, suppliers, investors, and communities.
CORPORATE GOVERNANCE COMPLIANCE STATEMENT CONTINUED
Independence: The Chairman was
considered independent on his
appointment. More information
about the Group Board is found
on pages 94 to 96.
Accountability and election: There
is a clear separation of duties
between the Chairman and CEO
roles. All the Directors seek election
by shareholders at the first AGM
after their appointment and annual
re-election by shareholders thereafter.
Senior Independent Director: Our
Senior Independent Director, Denis
Hennequin, provides a communication
channel between the Chairman and
the Non-executive Directors.
Evaluation: An internally facilitated
performance evaluation of the
Group Board and its Committees
was undertaken during the year in
accordance with the requirements
of the 2018 Code, details of which
can be found on page 107.
Attendance: The Directors have
attended all Group Board and
Committee meetings, details of
which are available on page 106.
Skills and experience: The Group
Board and its Committees are
considered to have an appropriate
combination of skills, experience and
knowledge to direct the Company.
Independent Auditors:
PricewaterhouseCoopers LLP
(“PwC”) were appointed as External
Auditors in 2019 following a
thorough tender process.
Non-Audit Services Policy: Details
on the Non-Audit Services Policy
are provided within this report on
page 117.
Internal Audit: Details of the Internal
Audit function, as undertaken by
KPMG, are provided within this
report on page 118.
Performance-related pay:
Our reward framework is simple,
transparent, and designed to
support and drive our business
strategy, details of which can
be found on page 129.
Workforce engagement: Details
on how Bakkavor engages with the
workforce and its key stakeholder
groups are presented on pages 66
to 71 and page 103.
Diversity: Information about
Bakkavor’s Inclusion and Diversity
Policy, Group Board diversity
and consideration of diversity in
succession plans can be found
on page 47 and pages 110 to 111.
Governance summary
Our governance framework
THE MANAGEMENT BOARD – Chaired by Agust Gudmundsson
The Management Board implements the strategic objectives set by the Group Board and delegates to management the detailed planning
and implementation of those objectives and policies, in accordance with appropriate risk parameters.
GROUP GENERAL COUNSEL AND COMPANY SECRETARY – Annabel Tagoe-Bannerman
The Group General Counsel and Company Secretary supports both the Group Board and Management Board, ensuring good information
flows and advising on all corporate governance matters.
GROUP BOARD COMMITTEES
Assist the Group Board in the fulfilment of its duties and responsibilities. Each Committee is responsible for reviewing and overseeing activities
within its Terms of Reference. The Chair of each Committee reports to the Group Board on the matters discussed at Committee meetings.
Reports from each Group Board Committee Chair, including information on each Committee’s respective composition and activities in the year,
can be found in the sections relating to each Committee within this report.
DISCLOSURE COMMITTEE
Chaired by Simon Burke
The Disclosure Committee
comprises the Chairman, the CEO,
the CFO and the Group General
Counsel and Company Secretary.
Other Directors, representatives
from the Company’s brokers,
members of the Company’s
Management Board and Senior
Executives and other external
advisers may attend meetings in
whole or in part, if invited. The
Disclosure Committee oversees
the Company’s compliance with
its disclosure obligations.
Read more on page 98
NOMINATION AND ESG COMMITTEE
Chaired by Simon Burke
The Nomination and ESG Committee
reviews the structure, size, and
composition of the Group Board,
ensuring that there is a healthy balance
of skills, knowledge, experience
and diversity and is responsible for
reviewing succession plans for the
Group Board, Management Board and
Senior Executives. The Nomination and
ESG Committee is also responsible
for the governance and oversight of
ESG matters. The Nomination and
ESG Committee will normally meet
not less than three times a year.
Read more on page 108
AUDIT AND RISK COMMITTEE
Chaired by Jane Lodge
The Audit and Risk Committee’s role
is to assist the Group Board with
the discharge of its responsibilities
in relation to financial reporting,
including reviewing the Group’s
annual and half-year Financial
Statements and accounting policies,
risk management and Internal and
External Audits and controls. The
Audit and Risk Committee will
normally meet not less than four
times a year.
Read more on page 113
REMUNERATION COMMITTEE
Chaired by Denis Hennequin
The Remuneration Committee
recommends the Group’s policy on
Executive remuneration, determines
the levels of remuneration for
Executive Directors and the
Chairman to ensure that these are in
line with the long-term interests of
the Group, and prepares an annual
remuneration report for approval
by the shareholders at the Annual
General Meeting. The Remuneration
Committee will normally meet not
less than three times a year.
Read more on page 120
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SECTION 1:
BOARD LEADERSHIP AND COMPANY PURPOSE
88 103
2018 Code Principles:
A. Effective and entrepreneurial Board to promote the
long-term sustainable success of the company, generating
value for shareholders and contributing to wider society
B. Purpose, values and strategy with alignment to culture
C. Resources for the company to meet its objectives and
measure performance. Controls framework for management
and assessment of risks
D. Effective engagement with shareholders and stakeholders
E. Consistency of workforce policies and practices to support
long-term sustainable success
Chairman’s introduction to governance 88
Strategic Report 1
Section 172 statement and the Group Board’s
engagement with key stakeholders
66
Purpose, values and culture 98
Group Board’s key activities 99
SECTION 2:
DIVISION OF RESPONSIBILITIES
104 105
2018 Code Principles:
F. Leadership of Board by Chair
G. Board composition and responsibilities
H. Role of NEDs
I. Company Secretary, policies, processes, information, time
and resources
Group Board composition 106
Roles and responsibilities 104
Time commitment, external appointments,
independence and tenure
105
SECTION 3:
COMPOSITION, SUCCESSION AND EVALUATION
106 110
2018 Code Principles:
J. Board appointments and succession plans for Board and
senior management and promotion of diversity
K. Skills, experience and knowledge of Board and length of
service of Board as a whole
L. Annual evaluation of Board and Directors and demonstration
of whether each Director continues to contribute effectively
Group Board composition 106
Nomination and ESG Committee report 108
Inclusion and Diversity 110
Group Board, Committee and Director performance
evaluation
107
SECTION 4:
AUDIT, RISK AND INTERNAL CONTROLS
112 147
2018 Code Principles:
M. Independence and effectiveness of Internal and External Audit
functions and integrity of financial and narrative statements
N. Fair, balanced and understandable assessment of the
company’s position and prospects
O. Risk management and internal control framework and
principal risks the company is willing to take to achieve its
long-term objectives
Audit and Risk Committee report 113
Risk Management 72
Fair, balanced and understandable assessment 147
Going Concern 146
Viability Statement 87
SECTION 5:
REMUNERATION
120 141
2018 Code Principles:
P. Remuneration policies and practices to support strategy
and promote long-term sustainable success with executive
remuneration aligned to company purpose and values
Q. Procedure for executive remuneration, Director and senior
management remuneration
R. Authorisation of remuneration outcomes
Directors’ Remuneration Report 120
This report’s key features
Over the next few pages, the Governance statement, including the reports of the Nomination and ESG Committee, Audit and Risk
Committee and Remuneration Committee, explains how we have applied the principles and complied with the provisions of the 2018 Code.
GOVERNANCE
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1
4
2
5
3
6
GROUP BOARD
Appointment: Simon has served as a Non-
executive Director of Bakkavor since February 2017
and was appointed as Chairman in October 2017.
External appointments: Simon is a Non-
executive Director of the Co-operative Group
Limited and also Chairman of The Light Cinemas
(Holdings) Limited and Blue Diamond Limited.
Simon Burke
Non-executive Chairman
Appointment: Agust is one of the founders of
Bakkavor and has served as Chief Executive
Officer of Bakkavor since May 2006. He served
as Executive Chairman of Bakkavor from 1986,
the year the Bakkavor Group was founded,
through to May 2006.
External appointments: Agust currently has no
external appointments.
Agust Gudmundsson
Chief Executive Officer
Appointment: Ben joined Bakkavor in 2011 as
Group Financial Controller and has served as
Chief Financial Officer and Executive Director
to the Group Board since 27 December 2020.
External appointments: Ben currently has no
external appointments.
Ben Waldron
Chief Financial Officer
Appointment: Mike joined Bakkavor in 2001
and became Chief Operating Officer UK in 2014
and has served as Executive Director since
27 December 2020.
External appointments: Mike currently has no
external appointments.
Mike Edwards
Chief Operating Officer, UK
Appointment: Denis has served as a Non-
executive Director of Bakkavor since February
2017 and is the Chairman of the Remuneration
Committee.
External appointments: Denis is currently a
Non-executive Director of Eurostar
International Limited, JDE Peet’s and Expresso
House. He is also Vice-Chairman of Pret A
Manger, Chairman of PICARD Company Limited
and Kellydeli, and a founding partner of
investment fund French Food Capital.
Denis Hennequin
Senior Independent Non-executive Director
Appointment: Sanjeevan has served as a
Non-executive Director of Bakkavor since
August 2021.
External appointments: Sanjeevan is currently
the Group Chief Data & AI Officer at ITV plc
and a Member of the Scholars’ Education Trust.
Sanjeevan Bala
Independent Non-executive Director
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7
10
8
11
9
12
Audit and Risk Committee
see page 113
Nomination and ESG
Committee see page 108
Remuneration Committee
see page 120
Group Board Committees
Appointment: Jane has served as a Non-
executive Director of Bakkavor since April 2018
and is the Chair of the Audit and Risk Committee.
External appointments: Jane is currently
a Non-executive Director and Chair of the Audit
Committees of DCC plc and FirstGroup plc,
and a Non-executive Director of Glanbia plc.
Jane Lodge
Independent, Non-executive Director
Appointment: Umran has served as a
Non-executive Director of Bakkavor since
September 2020.
External appointments: Umran is currently
a partner at August Leadership, an executive
search firm. She also serves on the board of the
International Youth Foundation, Baltimore and
as a trustee at Purchase College Foundation.
Umran Beba
Independent, Non-executive Director
Appointment: Lydur is one of the founders of
Bakkavor and has served as a Non-executive
Director since January 2017. He served as Chief
Executive Officer from 1986 to 2006 and Non-
executive Chairman from 2006 to 2017. He
served as Chairman of Exista from 2006 to 2010.
External appointments: Lydur currently has no
external appointments.
Lydur Gudmundsson
Non-independent, Non-executive Director
Appointment: Patrick L. Cook has served as
a Non-executive Director of Bakkavor since
July 2018.
External appointments: Patrick is currently
Managing Director at the Baupost Group. He is
also a member of the boards of DRS Acquisition
LLC, Surfaces Southeast Holdco, LLC and H&P
Partners, LLC and a member of the supervisory
board of Tanager Group B.V.
Patrick L. Cook
Non-independent, Non-executive Director
Appointment: Jill has served as a Non-executive
Director of Bakkavor since March 2021.
External appointments: Jill is currently a Non-
executive Director, Remuneration Committee
Chair and member of the Audit and Nomination
Committees of Bellway plc and Halfords Group
plc and a member of the ESG Committee of
Halfords Group plc. Jill is also a Non-executive
Director and member of the Remuneration
Committee and ESG Committee of C&C Group
plc, and Senior Independent Director,
Remuneration Committee Chair and a member
of the Audit and Nomination Committees of St.
Austell Brewery Company Limited.
Jill Caseberry
Independent, Non-executive Director
Appointment: Annabel joined Bakkavor as
Group General Counsel and Company Secretary
in June 2019.
Annabel Tagoe-Bannerman
Group General Counsel and
Company Secretary
GOVERNANCE
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GROUP BOARD CONTINUED
1
Simon Burke
Non-executive Chairman
Skills and experience: Simon is a Chartered
Accountant with over 30 years’ experience in the
retail and food sectors. Following a decade in
financial and advisory roles, he was appointed
CEO of Virgin Retail UK in 1988, and following a
turnaround of that business, held increasingly
senior roles until appointed CEO of the global
Virgin Entertainment Group in 1996. In 1999,
Simon was appointed Chairman and Chief Executive
of Hamleys plc where he completed a successful
restructuring and subsequent sale of the company
in 2003. Simon then specialised in value creation
roles in both quoted companies and private-equity-
backed businesses. He has chaired many well-
known consumer businesses, including Majestic
Wine, Mitchells & Butlers, Bathstore.com,
and Superquinn.
2
Agust Gudmundsson
Chief Executive Officer
Skills and experience: Agust received his
education from the College of Ármúli in
Reykjavik, Iceland.
3
Ben Waldron
Chief Financial Officer
Skills and experience: Prior to joining Bakkavor,
Ben was an Assurance and Advisory Director at
Ernst & Young London, bringing with him extensive
experience in strategy, transactions and consulting.
After joining Bakkavor as Group Financial
Controller, he became Head of Strategic
Development, supporting the Group’s IPO in 2017
and leading acquisitions and the disposal of non-
core business in the UK and Europe. In January
2019, he took on responsibility for the US business
as President of Bakkavor USA and has successfully
transformed the US operations into a high growth
and profitable business. Ben holds a Bachelor of
Science degree from the University of Birmingham.
4
Mike Edwards
Chief Operating Officer, UK
Skills and experience: With over 32 years’ experience
in the food industry including United Biscuits and
Heinz, Mike has extensive operational and commercial
expertise. Since joining in 2001, he has held various
senior operational roles across Bakkavor. He holds
a degree from the Polytechnic of Portsmouth.
5
Denis Hennequin
Senior Independent
Non-executive Director
Skills and experience: Denis has extensive
leadership experience within the retail sector,
spending the majority of his career with the
McDonald’s Corporation in a variety of senior
financial and operational roles before becoming
President and Chief Executive Officer of McDonald’s
Europe, where he was responsible for changing the
image and concept, securing its market-leading
position. Denis was appointed Chairman and Chief
Executive Officer of Accor in 2011 where he was
responsible for an estate spread across over 90
countries. He left Accor in 2013 to pursue an
advisory and portfolio career.
6
Sanjeevan Bala
Independent Non-executive Director
Skills and experience: Sanjeevan is a highly
experienced multi-award-winning data and analytics
professional with a proven track record of driving
customer-centric business transformations through
the strategic use of data resulting in EBIT and revenue
growth. Sanjeevan has successfully operated across
a range of sectors including media, retail, financial
services, e-commerce, and telecoms. He brings
expertise in digital transformation, data and AI
(both the science and development of new operating
models and organisational structure to leverage the
value of data), innovation and culture. Sanjeevan has
had exposure to the food and beverage sector through
his time consulting with PwC to Bestfoods, and
through his time with Dunnhumby working with Tesco.
7
Umran Beba
Independent Non-executive Director
Skills and experience: Umran is an experienced
senior business executive with a general
management background and significant expertise
in talent and diversity. Umran spent 25 years
at PepsiCo Inc., the global food and beverage
company, where she held a number of international
commercial and functional roles, with her last
position being Senior Vice President, Chief Global
Diversity and Engagement Officer. From 2010 to
2015, she served as an Independent Non-executive
Director on the board of Calbee, Inc, a major
Japanese snack foods manufacturer and for eight
years until June 2020, was a Future Council
Member of the World Economic Forum. She earned
her MBA and Bachelor of Science in Industrial
Engineering from Bogazici University in Istanbul.
8
Jill Caseberry
Independent Non-executive Director
Skills and experience: Jill is an accomplished
general manager with extensive sales, marketing
and general management experience across a
number of blue-chip companies including Mars,
PepsiCo and Premier Foods. Jill brings a depth
of understanding of the food industry, spending
most of her career in marketing, commercial and
general management roles in the food and
beverage sector, where she has been involved in
both turnaround and growth situations, in a range
of branded and own label businesses.
9
Patrick L. Cook
Non-independent,
Non-executive Director
Skills and experience: Patrick received his education
from Vanderbilt University in Tennessee, United States
and is a senior investment professional with significant
direct investing experience in food companies.
10
Lydur Gudmundsson
Non-independent,
Non-executive Director
Skills and experience: Lydur has unique expertise
and insight into the Company’s business as a
founder of the Bakkavor Group. He received his
education from the Commercial College of Iceland.
11
Jane Lodge
Independent Non-executive Director
Skills and experience: Jane spent 25 years at
Deloitte & Touche LLP, the audit, tax, consulting,
enterprise risk and financial advisory services
provider, progressing to a Senior Audit Partner
working for major corporates. She served as the
first female Partner to sit on the Deloitte UK Board,
overseeing management strategy, acquisitions,
performance against plan and admission of new
partners. She was also the manufacturing and
industry lead Partner, providing best practice and
insights across the Deloitte businesses of tax,
auditing, consulting, and corporate finance. Jane left
Deloitte in 2011 to build a non-executive portfolio.
12
Annabel Tagoe-Bannerman
Group General Counsel
and Company Secretary
Skills and experience: Annabel has held senior
legal positions in a number of companies including
Britvic plc and Ladbrokes plc. She was the Group
General Counsel and an Executive Committee
member at Ladbrokes plc. She trained and began
her career in private practice in the City of London
at the multinational law firm SJ Berwin LLP.
Annabel obtained her post-graduate law degree
at The University of Law, UK and qualified as a
solicitor (England and Wales) in March 2005.
She is also a Chartered Company Secretary (ACIS).
Annabel is an alumna of London Business School.
Group Board diversity as at 7 March 2022
By gender
Number of Directors
By role
Number of Directors
By tenure
1
Number of Directors
Male
8
Executive
3
<3 years
7
3-5 years
4
7-10 years
0
>10 years
0
Non-executive
8
Female
3
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The Management Board
implements the strategic
objectives set by the Group
Board and delegates the
detailed planning and
implementation of those
objectives and policies to
management, in accordance
with appropriate risk
parameters.
See Group Board profile on page 94 →
Agust Gudmundsson
Chief Executive Officer
Donna-Maria Lee joined Bakkavor Group plc
in September 2018. Donna-Maria has worked
within manufacturing, consumer and corporate
functions for over 25 years. Prior to joining
Bakkavor, she was Senior Vice President, Global
HR, Burberry plc. In this role Donna-Maria was
accountable for the overall HR strategy, people
and change agenda.
See Group Board profile on page 94 →
Mike Edwards
Chief Operating Officer, UK
Donna-Maria Lee
Chief People Officer
Pete joined Bakkavor in October 2020. Pete has
the overall responsibility for the US operations.
After graduating with a degree in engineering
and a Masters in Business Administration,
Pete has held management, operational and
commercial roles at PepsiCo and Nestle, and
led the global supply chain for Dunkin’ Donuts
and Baskin-Robbins ice cream and for fresh
prepared salad producer Ready Pac. Pete’s
most recent role was with Revlon as Global
Chief Supply Chain and Manufacturing Officer.
Pete Laport
President, Bakkavor US
Ben Waldron
Chief Financial Officer
See Group Board profile on page 94 →
1 Since the Company‘s listing on the London Stock Exchange in October 2017.
Management Board diversity as at 7 March 2022
By gender
Number of Directors
By tenure
1
Number of Directors
Male
4
<3 years
3
3-5 years
2
7-10 years
0
>10 years
0
Female
1
MANAGEMENT BOARD
GOVERNANCE
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CORPORATE GOVERNANCE REPORT
Board leadership and Company purpose
The Group Board challenges strategy, performance,
and the responsibility of management to ensure
that our purpose, values, strategy and culture are
aligned and promote the long-term success of
the Group, generating value to shareholders and
other stakeholders.
THE ROLE AND RESPONSIBILITIES
OF THE GROUP BOARD
The Group Board provides effective and
entrepreneurial leadership by setting the long-term
strategic direction of the Group and overseeing
and challenging management’s implementation
of the strategy, as well as establishing our
purpose, vision and values which underpin
the culture of the business.
It is collectively responsible for promoting the
long-term success of the Group through the
creation and delivery of sustainable stakeholder
value. In exercising this responsibility, the Group
Board takes into account the needs of all relevant
stakeholders and its contribution to wider society.
The Group Board endeavours to ensure that
workforce policies and practices are in line with
our values and support the Group’s long-term
sustainable success.
It is accountable for ensuring that, as a collective
body, it has the appropriate skills, knowledge,
experience, and resources in place to meet its
objectives and perform its role effectively.
The Group Board is provided with timely and
comprehensive information to enable it to
discharge its responsibilities, to encourage
strategic debate and to facilitate robust, informed,
and timely decision-making. The Group Board also
receives regular presentations from key Group
heads of functions and updates from the Chair
of each Committee.
Subject to company law and the Articles of
Association, the Directors may exercise all of
the powers of the Company and delegate their
power and discretion to Committees. Decisions
reserved for the Group Board include approval of
strategic plans and annual budgets, acquisitions,
audited financial statements, and appointment
of additional Directors. Its work also includes
engagement with key stakeholders, including
our shareholders.
The powers of the Directors are set out in the
Schedule of Matters Reserved for the Group
Board. This is available for review on our website
at www.bakkavor.com/en/investor/governance/
default.aspx.
Vision, purpose, values and culture
The Group Board sets the Group’s purpose:
To delight our customers and consumers through
the fresh, convenient, innovative and great-
tasting food that we proudly create every day; and
our vision: To lead the way in bringing innovative,
great-tasting, freshly prepared food to people
around the world. Both are key to strengthening
the Group’s impact among its stakeholders and
are supported by the Group’s values and strategy.
The Group Board is responsible for assessing,
monitoring, and promoting the Group’s culture
and ensuring that this is closely aligned with its
strategy. All Directors act with integrity and lead
by example to promote the desired culture.
During the year, the Group Board approved the
development of the Group’s employer brand, Proud
to be Bakkavor, and the evolution of the Group’s
values. The refreshed values focus on trust and
respect: working together, being open and honest
with each other and ensuring that we treat all
colleagues the same. They are warmer, more
personal and more people-focused and are the
foundation of our culture and guide our behaviours and
reflect who we are today and aspire to be tomorrow.
Our customers and suppliers remain at the
heart of what we do as we value and protect
our customer partnerships, maintain our
commitment to the highest standards of food
safety, integrity and quality, innovate to help
customers stay ahead and work together with
our customers to anticipate future needs.
It is important that we get it right and keep
it right; uphold our standards, stay safe and
look after ourselves and each other and take
responsibility for the impact of our actions on
the environment and in our communities. We are
proud of what we do and inspire others to work
with passion and enthusiasm and look for ways
to improve the way we work.
The Group Board received an in-depth review on
the evolution of the Group’s values from the Chief
People Officer and had an opportunity to review
and approve a colleague video highlighting our
refreshed values and demonstrating the ways in
which our values come alive. The colleague video
has been well embraced and has served as one of
the key tools to embed the values and underpin the
culture throughout the business. The Group Board
also received feedback from Jill Caseberry, the
designated workforce engagement Non-executive
Director, on her session with Bakkavor’s GEF where
she discussed the refreshed values and the work
being done to ensure they underpin the Group’s
culture and support the delivery of our vision.
For further information on the Group’s vision,
purpose and values, please see pages 16 to 17.
The Management Board
The Group Board is supported by the
Management Board, which implements the
strategic objectives of the Group Board, agrees
on performance criteria, and delegates the
detailed planning and implementation of those
objectives and policies to Senior Executives
(being the Executives within the tier below the
Management Board) in accordance with
appropriate risk parameters.
The Management Board monitors compliance
with policies and achievement against objectives
by holding Senior Executives accountable for
its activities through monthly and quarterly
performance reporting and budget updates.
The responsibilities delegated to the Management
Board cover the following areas:
• Preparing strategic proposals, corporate plans,
and budgets.
• Executing the Group corporate strategy agreed
upon by the Group Board.
• Executing the Trusted Partner strategy.
• Executing actions in relation to key Group Board
decisions such as investments, mergers and
acquisitions, disposals, and divestments.
• Monitoring performance and evaluation of health
and safety.
• Establishing a system of internal control and risk
management.
• Review and approval of revised policies prior
to approval by the Group Board.
Committees
The Group Board has established three Board
Committees: the Audit and Risk Committee,
the Nomination and ESG Committee and the
Remuneration Committee. All three Committees
comprise only Non-executive Directors and each
Committee has agreed Terms of Reference which
are available on our website at www.bakkavor.com/
en/investors/governance/default.aspx.
These Committees assist with the detailed
oversight of Bakkavor’s financial reporting,
risk management and Internal and External
Audit work, ESG matters, establishing the
Remuneration Policy and overseeing its
implementation, and building appropriate
succession and contingency plans for the Directors
and Senior Executives, including overseeing
workforce engagement, and establishing a diverse
pipeline of talent for both the Group Board,
Management Board and Senior Executive positions.
The Group Board has also established a
Disclosure Committee which comprises the
Chairman, Chief Executive Officer, Chief Financial
Officer and Group General Counsel and Company
Secretary. The Disclosure Committee oversees
the Company’s compliance with its disclosure
obligations under the Market Abuse Regulation.
The Group Board and its Committees renewed
their Terms of Reference and Matters Reserved
for the Board in 2021.
Conflicts of interest
Directors have a statutory duty to avoid situations
in which they may have interests that conflict with
those of the Company, unless that conflict is first
authorised by the Group Board. Directors are
required to disclose both the nature and extent of
any potential or actual conflicts with the interests
of the Company.
In accordance with the Companies Act 2006,
the Company’s Articles of Association allow
the Group Board to authorise potential conflicts
that may arise and to impose such conditions
or limitations as it sees fit. During the year, any
potential conflicts were considered and assessed
by the Group Board and approved where
appropriate. The Group Board confirms that
the procedures in place to deal with conflicts
of interest are operating effectively.
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Key Group Board activities in 2021
UK supply chain
• Received an in-depth update on the UK supply chain.
• Approved management’s approach to the factors affecting the inbound and outbound supply such as
COVID-19, Brexit, labour availability, shortage of UK lorry drivers and road and sea freight delays.
• Discussed key drivers and recovery of raw materials and packaging inflation.
• Reviewed our responsible sourcing strategy which has seen the business evaluate over 500 direct
suppliers on environmental, ethical and integrity issues, and engage directly with suppliers in aligning
their performance to our requirements, as set out in our Supplier Code of Conduct.
• Received updates on strategic supplier relationships, category procurement expertise and the Bakkavor
Inbound Logistics (“BIL”) centre of excellence.
Culture
• Received updates on the development of human resources at Bakkavor, and the key areas of focus for delivery,
including modernising our HR systems, investing in leadership capabilities across the business and improving
talent development and succession planning processes.
• Received regular updates on Bakkavor’s brand and Bakkavor’s new values and reviewed and approved a
colleague video highlighting our refreshed values, which has served as one of the key tools to embed the
values and underpin the culture throughout the business.
• Monitored the impact of the Group’s values on customers and suppliers ensuring that we value and protect
customer partnerships and maintain the highest standards of food safety, integrity and quality, innovate to
help customers stay ahead and work together with customers to anticipate future needs.
• Received updates on colleague engagement initiatives, including the work of the Wellbeing Steering
Committee in relation to how to support colleagues’ physical, emotional and financial wellbeing.
• Reviewed the outcome of the Employee Engagement Survey which included insights, colleagues’ views and
responses to changes in the business.
• Assessed and monitored the culture by dedicating time at meetings for updates from the Chief People Officer
covering discussions on culture, values and colleague workforce matters, monitoring the levels and nature of
whistleblowing reports as well as monitoring absenteeism and employee turnover.
ESG
• Received in-depth sustainability briefing from external advisers to prepare for meeting our 2040 Net Zero
commitments, utilising offsets and the price of carbon, TCFD and wider reporting duties and the rise of the
biodiversity agenda.
• Approved the ESG workstreams that are involved in activities that support delivery of our Net Zero
commitment and the wider Trusted Partner strategy and reviewed the Group’s ESG policies and
commitments, including the Net Zero target and KPIs progress and approach.
• Monitored implementation of the Trusted Partner strategy and received updates on progress of the Trusted
Partner strategy through the year.
• Reviewed and considered the Group’s community initiatives, how we are delivering these and our progress
in doing so.
• Received updates on upcoming Task Force on Climate-related Financial Disclosures (“TCFD”) requirements
and reviewed overall outcomes of climate risk assessment. Further details of our approach to ESG are set out
in pages 34 to 61 of the Strategic Report.
Technical risk management
and mitigation – health and
safety and food safety
• Received regular updates on the health and safety auditing of the business against both standard controls
on both an announced and unannounced basis and our technical strategy through the year.
• Monitored the business response to the changing impact of the COVID-19 pandemic and progress made
in standardising food safety across the business.
• Oversaw implementation of control measures based on UK government and Health Security Agency and
industry guidance.
CUSTOMERS SUPPLIERS INVESTORS COLLEAGUES COMMUNITIES
Our stakeholders
Board meetings are an important mechanism
through which the Directors discharge their duties,
particularly under s.172 of the Companies Act 2006.
The next few pages describe the Group Board’s activities during
the year under review. Whilst not being an exhaustive list, it
provides an indication of the factors affecting our stakeholders
which are considered as part of those discussions.
For each Group Board and Committee meeting, a tailored
agenda is agreed beforehand by the Chairman, Committee
Chair, Chief Financial Officer (“CFO”) (as appropriate) and
Group General Counsel and Company Secretary.
A typical meeting will comprise reports from the Chief Executive
Officer (“CEO”) and the CFO and the Chief Operating Officer, UK
(“COO”), as well as regional reports (US and China) on current
trading and financial performance. There is also a report from
the Chief People Officer (“CPO”) at each Group Board meeting
reviewing the colleague engagement plan, Company values and
culture as well as the employer brand. Further, there will be
two or three deep dives into areas of strategic importance.
STRATEGIC DEEP DIVES
At each meeting, the Group Board received presentations
on and discussed selected strategically significant matters
in greater depth to evaluate progress, provide insight and,
where necessary, decide on appropriate action.
GOVERNANCE
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CORPORATE GOVERNANCE REPORT CONTINUED
COVID-19 response
• Continued to have oversight and support of the decisions and adjustments made by the Management Board
in response to the COVID-19 pandemic.
• Received in-depth updates and discussed and monitored the impact of COVID-19 on the business and
stakeholders.
Brexit
• Received regular updates on the Group’s preparations in light of the developing government guidance,
focusing on the supply chain, customers and the management of operational risk, financial impact and
potential strategic consequences.
Strategy and Company
performance
• Approved the evolved Group strategy to emphasise the importance of trust in everything that we do.
The CEO and CFO led discussions focusing on recent trading, general business performance and the key
strategic initiatives underway:
UK
• Received updates on progressive trading performance in the UK.
• Discussed industry-wide supply chain disruption, labour shortages and inflationary pressures and the
mitigating actions.
• Discussed COVID-19 and Brexit disruption and continuation of delivering business priorities and UK efficiencies.
• Discussed commercial landscape and competitor environment across the UK business.
US
• Discussed industry-wide labour shortages and inflationary pressures and the mitigating actions.
• Discussed COVID-19 disruption and continuation of delivering business priorities.
• Discussed future capital plans to deliver on the regions’ strategic initiatives with region updates on project
speed and delivery.
• Continued to grow and strengthen our relationship with our existing customers through new product
development and expansion of our core offering with new product categories.
China
• Discussed and agreed the forward-looking strategic priorities in China including new business opportunities,
important expansion projects such as the completion of new replacement sites in Wuhan and Xi’an, and
bakery expansion.
• Discussed COVID-19 disruption and continuation of delivering business priorities.
• Continued to grow and strengthen our relationship with our existing customers through new product
development and expansion of our core offering with new product categories.
• Discussed the development of new channel opportunities in retail and office catering.
Financial updates
• Reviewed financial key performance indicators (“KPIs”) and introduced further non-financial KPIs.
• Recommended the payment of the previously suspended final dividend for 2019 of 4.00 pence per Ordinary
share paid on 25 May 2021 to shareholders.
• Agreed to reinstate an interim dividend of 2.64 pence per Ordinary share on 15 October 2021 to shareholders
and agreed to propose a final dividend of 3.96 pence per Ordinary share at the AGM on 25 May 2022.
• Discussed the balance sheet strategy, capital efficiency and leverage position of the Group.
• Reviewed financial performance in the UK, US and China.
• Received updates on performance against the prior year and against the budget.
• Approved the 2022 budget.
• Considered and approved the Group Tax Strategy and Policy.
• Considered and approved the Group Treasury Policy.
• Received regular updates from the Audit and Risk Committee Chair on the Committee’s oversight
of financial performance.
• Approved the viability and going concern statements.
• Following the recommendation from the Audit and Risk Committee, approved the reappointment of PwC as the
Company’s External Auditors and agreed the reappointment be proposed to shareholders at the 2022 AGM.
• Oversaw a disciplined approach to, and the implementation of, the capital allocation framework (as set out
on page 65 of the Financial Review) to enhance shareholder value.
• Approved material capital expenditure projects in line with the Group’s Capital Expenditure Policy and
specifically in relation to ESG initiatives, challenged the Management Board to direct the strategic
implementation of, and capital allocation for, strategic projects supporting the Trusted Partner objectives,
including energy efficiency and low carbon projects.
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Governance and
legal governance
• Deep dive into corporate governance led by the Group’s external solicitors covering audit and governance
reform, shareholder activism and ESG.
• Implementation of the 2018 Code for the 2021 financial year.
• Reviewed the Group Board and Management Board composition, diversity and succession plans.
• Discussed and approved the Non-executive Directors’ succession plan.
• Undertook an internal evaluation of the Group Board, Committees’ and individual Directors’ effectiveness and
considered the output and recommendations from the evaluation as described on page 107.
• Led by the Senior Independent Director, undertook an evaluation of the performance of the Chairman.
• Approved the Annual Report and Accounts and the half-year results, going concern and longer-term Viability
Statement, Notice of AGM and the Modern Slavery Statement.
• Reviewed the roles of the Group Board Committees in light of the changes proposed by the 2018 Code and
revised the Terms of Reference for each of the Committees together with the Schedule of Matters Reserved
for the Board. These can be reviewed on the Bakkavor website at www.bakkavor.com/en/investors/
governance/default.aspx.
• Reviewed revisions to the Group’s Whistleblowing policy.
• Received governance updates and ongoing training on relevant matters throughout the year in light of the
changes introduced by the 2018 Code and updates on Directors’ duties under the Companies Act 2006.
Investor engagement
• Received regular updates on Bakkavor’s share price performance, analyst consensus, analyst ratings and
target prices, as well as summary of listed peer results.
• Held two investor roadshow events following the full-year results in March 2021 and the interim results in
September 2021, both of which were conducted virtually via video conferencing technology due to ongoing
COVID-19 restrictions.
• Received feedback following investor roadshows and meetings as part of the Group Board pack, and in
discussion with the CFO and the Company’s brokers, with the key areas of focus being the impact of COVID-19,
labour availability and its impact on the supply chain, inflationary headwinds, leverage reduction, dividend and
international growth opportunities.
• Increased engagement on ESG matters and reviewed and approved the creation of a Group ESG Executive
Committee, extended the remit of the Nomination Committee to include ESG governance and oversight,
and appointed Umran Beba as designated Non-executive Director on ESG matters and Jill Caseberry as
designated workforce engagement Non-executive Director.
• Reviewed the investor relations calendar, including consideration of the quarterly trading updates.
• Received, reviewed and discussed draft financial results statements and accompanying presentations.
• Due to ongoing COVID-19 restrictions we were not able to host investor or analyst site visits during the year,
but plan to facilitate this in 2022.
• Continued to encourage engagement with investors and other stakeholders.
Risk
• Reviewed the principal risks to the Group and agreed the Group risk appetite for each of the principal risks.
• Discussed changes and re-categorisation of principal risks for the 2021 Annual Report and Accounts.
• Received technical updates from the UK, US and China concerning health and safety, food safety and
whistleblowing.
• Agreed the risk-based, internal audit scope, providing assurance on management controls. The internal audit
programme is managed by KPMG LLP.
• Considered risk appetite in connection with major capital proposals and transformation projects. Proposals
are supported by detailed analysis to ensure the risks associated with each project are fully understood.
• Discussed the impact of Climate change and sustainability risk on the Group.
• Discussed the impact of cyber risk and approved insurance cover.
• Encouraged additional mitigation of the risk involved with rising labour costs and increasing concerns about
availability of talent.
• Received regular updates from the Audit and Risk Committee Chair on the activities of the Audit and Risk
Committee during the Full-Year 2021.
CUSTOMERS SUPPLIERS INVESTORS COLLEAGUES COMMUNITIES
Our stakeholders
GOVERNANCE
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CORPORATE GOVERNANCE REPORT CONTINUED
Workforce/colleague
engagement
• With regard to engagement with colleagues and recognising the colleague voice, considered feedback from
the Employee Engagement Survey (“EES”) and actions undertaken to recruit and develop talent within the
business. See pages 18 to 21, 47 and 67 of the Strategic Report.
• Reviewed the designated workforce engagement Non-executive Director role and agreed it was an effective
way of enhancing colleague engagement.
• While the Group’s designated workforce engagement Non-executive Director was being recruited, the Group
Board received regular updates from the Chief People Officer on the discussion points with SEF and GEF
around COVID-19 and how the input from the workforce shaped the resources provided in the Bakkavor
Employee Health and Wellbeing Toolkit, offering colleagues emotional, physical and financial support.
• During the year, Jill Caseberry was appointed as the Group’s designated workforce engagement Non-
executive Director which ensures colleagues have a strong voice and representation across the business
and at the most senior level within the business.
• Following the appointment of Jill Caseberry as the designated workforce engagement Non-executive Director,
Jill attended a session with Bakkavor’s SEF and GEF to introduce herself and explain her role. The Group
Board received feedback on Jill’s engagement with SEF, GEF and colleagues generally.
• Jill Caseberry had a follow-up session with the SEF and GEF in early February 2022 which focused on the
alignment of Executive remuneration with the wider company pay policy. Other topics covered at the session
included an overview of corporate governance; the role of the Remuneration Committee; getting senior
Reward right; how Executive remuneration packages work; and a ‘Q&A’ session. It was well received by our
colleagues and was considered to be an engaging, informative and successful session.
• Reviewed the results of the EES, and responded to the feedback by supporting the renewal of the Group’s values.
• Approved a significant investment into two training and development programmes that were launched in 2021:
the Executive Leadership Development Programme and the Front-Line Leaders Development Programme.
• Continued to focus on health and safety for colleagues.
• Discussed employee retention and focus on employee survey results in line with the Group themes on career
development and the Group’s values, review of the reward strategy and benefit scheme and review of the
terms and conditions around pay metrics.
• Further embedded the diversity and inclusion culture and oversaw the implementation of the Group policy.
For further information on workforce engagement see page 103, Q&A with Jill Caseberry, page 47 of the
Trusted Partner report and page 145 of the Directors’ Report.
Remuneration
• Determined remuneration arrangements for the Chairman, Executive Directors and Management Board.
• Reviewed workforce remuneration and related policies, taking into account the alignment of incentives and
rewards with wider Company pay policy when setting the policy for Executive Director remuneration.
• Received regular updates from the Remuneration Committee Chair on the activities of the Remuneration
Committee during 2021.
Customers and suppliers
• Received updates on the proactive engagement with suppliers and customers to review the potential risks
within the supply chain due to labour and raw material shortages, driver availability in the supply chain and
inflationary pressures.
• Discussed the management of labour requirements and oversaw the decision to focus on core ranges
to ensure customer services levels are maintained.
• Received updates on the collaboration with customers on sourcing raw materials and discussions with
customers in relation to our pricing models to enable us to pass on the inflationary impact of key raw materials.
• Received updates on how BIL has provided effective solutions to Brexit-related changes, including a
centralised team for customs declarations, end-to-end provision of logistics solutions, and an EU-based
consolidation and cross-docking hub, enabling us to consolidate our EU supplies into trucks and reduce
potential customs and Export Health Certificate (“EHC”) errors or delays.
Group IT strategy
• Reviewed Group IT objectives, strategy and tactics to deliver business trust, value and security resilience.
• Monitored the progress made against the 2020 and 2021 Group IT priorities.
• Reviewed the status of the UK cyber programme and Group IT international programme.
• Discussed Group IT-related risks including cyber security and business continuity.
Key priorities for the Board
in 2022
• Continuing to foster relationships and engaging with stakeholders, including colleagues, customers,
suppliers, investors and communities.
• Driving efficiencies and profitability in the UK.
• Accelerating the US investment programme to capitalise on the region’s growth opportunities.
• Challenging the growth opportunities in China to deliver improved margins.
• Engaging with capital markets to drive share performance.
• Reviewing strategy and plan to enhance returns on capital.
• Aligning culture and values with strategy.
• Aligning colleague engagement and talent pipeline development.
• Focusing on the ESG framework and its implementation.
CUSTOMERS SUPPLIERS INVESTORS COLLEAGUES COMMUNITIES
Our stakeholders
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The Group Board appointed
Jill Caseberry as the Group’s
designated workforce engagement
Non-executive Director to enhance
existing engagement.
In July 2021, Jill attended a session
with Bakkavor’s SEF and GEF via
video conference to introduce herself
and explain her role as the Group’s
designated workforce engagement
Non-executive Director and how
the colleague voice is a priority at
boardroom level. Bakkavor’s workforce
engagement initiatives were also
communicated to colleagues via our
colleague magazine ‘JUST MADE’
and colleagues were invited to email
Jill with their ideas for increasing
engagement with or among colleagues.
The second session, postponed from
late 2021 (due to COVID-19 restrictions)
until February 2022 in order to take
place face to face, was focused on the
alignment of Executive remuneration
with the wider company pay policy. Other
topics covered at the session included
an overview of corporate governance;
the role of the Remuneration
Committee; getting senior Reward right;
how Executive remuneration packages
work; and a ‘Q&A’ session. It was well
received by our colleagues and was
considered to be an engaging,
informative and successful session.
Governance in action
Engaging our workforce
Q
YOU STARTED YOUR ROLE WITH
BAKKAVOR IN MARCH 2021, WHAT
ARE YOUR INITIAL IMPRESSIONS OF
THE GROUP
The business is friendly, open, engaging
and very consistent. From HR to
Commercial to Operations, everyone
who I have spoken to has the same
ambition, drive, determination, and
resilience. This is great, as consistency
is key in a multi-site business.
Q
CAN YOU TELL US ABOUT YOUR
CAREER SO FAR?
During my career, I worked for fast
moving consumer goods (“FMCG”)
companies in the food and beverage
space, including Mars, PepsiCo and
Premier Foods. I was predominantly
in sales and marketing roles and then
latterly moved into general management.
As a Non-executive Director, I’ve worked
in a number of businesses that have
consumers at the heart, such as housing
companies and breweries, but until now
I’ve not had a role in FMCG. When
Bakkavor approached me, I described it
as hitting the bullseye, because this is
the sector that I’ve grown up in and love.
Q
HOW IMPORTANT IS IT FOR
COLLEAGUES TO HAVE A VOICE
IN THE BOARDROOM?
It’s critical. However close the executives,
non-executives and management team are
to the business, we are not on the frontline,
delivering for our customers every day. The
best ideas to improve processes often
come from colleagues, so it’s brilliant
that Bakkavor has made the colleague
voice a priority at boardroom level.
Q
WHAT TEND TO BE THE MAIN
COLLEAGUE ENGAGEMENT
CHALLENGES FOR A COMPANY
LIKE BAKKAVOR?
When you have c.19,000 colleagues,
it’s difficult to make sure that every
individual feels like they are heard
and listened to. This is why every idea
needs feedback.
Q
BAKKAVOR’S SITE EMPLOYEE FORUMS
(“SEF”) AND GROUP EMPLOYEE
FORUM (“GEF”) HELP TO BRING THE
COLLEAGUE VOICE TO THE FORE. HOW
IMPORTANT ARE FORUMS LIKE THIS?
They are vital. In companies like
Bakkavor, there has to be a balance
between Group-based initiatives and
local initiatives, and site-based forums
are a really good way of empowering
colleagues to deliver the best from
their sites and themselves.
Q
FINALLY, YOU’VE HAD THE CHANCE
TO SEE THE TOPLINE RESULTS
OF OUR RECENT EMPLOYEE
ENGAGEMENT SURVEY. WHAT DID
YOU THINK?
Nothing surprised or concerned me.
I thought it was very thorough and
was delighted to see questions about
wellness and inclusion and diversity,
as those topics have really brought
the colleague voice to the fore.
In companies
like Bakkavor,
there has to
be a happy balance
between Group-based
initiatives and local
initiatives.
Jill Caseberry
Independent Non-executive Director
Talking to colleagues locally is the
best way of getting feedback and in the
coming year, Jill will be visiting local
sites to give colleagues an opportunity
to meet with her and share their views.
Here, Jill gives an insight into her initial
impressions of the Group and her career
so far:
GOVERNANCE
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CORPORATE GOVERNANCE REPORT
CONTINUED
The Group Board is satisfied that there is a clear division of responsibility between the leadership
of the Group Board and the Executive leadership of the business.
Through the leadership of the Chairman, a culture of debate and open dialogue is promoted with effective contribution
of all Non-executive Directors who provide constructive challenge and hold management to account.
Key roles and responsibilities
Chairman
Simon Burke
The Chairman is responsible for leading the Group Board and creating the right conditions to ensure the Group
Board’s effectiveness in all aspects of its role, including its membership and that of its Committees.
The Chairman sets the Group Board’s agenda, in consultation with the Chief Executive Officer and the Group
General Counsel and Company Secretary, taking full account of Group Board members’ priorities and concerns
and the need to allow sufficient time for robust and constructive discussion and challenge. He is responsible
for encouraging and facilitating active engagement by all Directors, drawing on their skills, knowledge and
experience. The Chairman is also responsible for promoting effective communication between the Group Board,
Senior Executives, shareholders and other major stakeholders.
The Chairman has a close working relationship with the Chief Executive Officer and the Group General Counsel
and Company Secretary to ensure that the strategies and actions agreed by the Group Board are implemented.
At least annually, the Chairman meets with the Non-executive Directors without the Executive Directors present
to discuss, amongst other matters, the performance of Executive Directors, the Group Board as a whole, the
Committees and the interaction between the Executive and Non-executive Directors.
Chief Executive Officer
Agust Gudmundsson
The Chief Executive Officer (“CEO”) has specific responsibility for recommending the Group’s strategy to the
Group Board and for implementing the strategy once approved. In undertaking such responsibilities, the CEO
takes advice from and is provided with support by the Management Board and his Senior Executive team.
Together with the Chief Financial Officer and the Chief Operating Officer, the CEO monitors the Group’s
operating and financial results and directs the day-to-day business of the Group. The CEO is also responsible
for the recruitment and development of the Group’s Senior Executive team below Group Board level.
Chief Financial Officer
Ben Waldron
The Chief Financial Officer (“CFO”) is responsible for the financial reporting of the Group, monitoring the Group’s
operating and financial results and management of the Group’s internal financial risk management and financial
control systems. He supports the CEO in implementing the Group’s strategy and, in relation to the financial and
operational performance of the Group, is also responsible for the Group Treasury, Tax, Legal, Investor Relations,
Risk, and Information Systems functions.
Chief Operating
Of ficer, UK
Mike Edwards
The Chief Operating Officer, UK (“COO”) is responsible for overseeing the core UK business. He supports the
CEO in implementing the Group’s strategy and is responsible for UK Technical, Procurement, Commercial and
Operational functions.
Division of responsibilities
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Non-executive Directors
Sanjeevan Bala
Umran Beba
Simon Burke
Jill Caseberry
Patrick Cook
Lydur Gudmundsson
Denis Hennequin
Jane Lodge
The role of the Non-executive Directors is to offer guidance and advice to the Group Board as a whole and the
Executive Directors in particular, drawing on their wide experience across many industries. They also provide
scrutiny, constructive challenge and oversight of the Executive Directors and Senior Executives.
NONEXECUTIVE DIRECTORS’ ROLE AT BOARD MEETINGS
Independent and Non-independent Non-executive Directors assess, challenge and monitor the Executive
Directors’ delivery of strategy within the risk and governance structure agreed by the Group Board.
As Group Board Committee members, they also review the integrity of the Group’s financial information,
recommend appropriate succession plans, monitor Board diversity and set the Directors’ remuneration.
NONEXECUTIVE DIRECTOR TIME COMMITMENT
Each Director commits to dedicating an appropriate amount of time to their duties during the financial year,
and it is expected that the Non-executive Directors will meet the time commitment reasonably expected
of them, pursuant to their letters of appointment. Where Directors are unable to attend meetings, they are
encouraged to give the Chairman their views in advance on the matters to be discussed.
EXTERNAL APPOINTMENTS
In advance of any new Group Board appointments, each potential new Non-executive Director is required to
provide a detailed overview of all other directorships and significant commitments, together with a broad
indication of the time commitment associated with such other directorship(s) or significant commitments(s).
All Directors must seek prior approval of the Group Board in advance of undertaking any additional external
appointments. The Company recognises that external appointments enable Directors to broaden their knowledge
and experience to the benefit of the Company. Before approving any additional external appointments, the Group
Board shall consider the time commitment required for the role. Each proposed external appointment shall be
reviewed independently.
MONITORING NONEXECUTIVE DIRECTOR INDEPENDENCE
The Group Board reviews the independence of its Non-executive Directors as part of its annual Board
effectiveness review.
With the exception of Lydur Gudmundsson and Patrick L. Cook, the Group Board considers the Non-executive
Directors to be independent and the Chairman was considered to be independent on appointment.
TENURE
The Company maintains clear records of the terms of service of the Chairman and Non-executive Directors
to ensure that they continue to meet the requirements of the 2018 Code. Neither the Chairman nor any of the
Non-executive Directors have exceeded the maximum nine-year recommended term of service set out in the
2018 Code.
Senior Independent
Non-executive Director
Denis Hennequin
The Senior Independent Non-executive Director acts as a sounding board for the Chairman. He serves as a
trusted intermediary for the other Directors when necessary. He is also available to shareholders if they are
unable to resolve any concerns through communication with the Chairman, CEO or other Executive Directors,
or when shareholders prefer to speak directly to him.
He is responsible for evaluating the performance of the Chairman on behalf of the other Directors. Led by the
Senior Independent Non-executive Director, the Non-executive Directors meet without the Chairman present
at least annually to appraise the Chairman’s performance, and on other occasions as necessary.
Group General Counsel
and Company Secretary
Annabel Tagoe-
Bannerman
The Group General Counsel and Company Secretary supports and works closely with the Chairman, the CEO,
the CFO and the Group Board Committee Chairs in setting agendas for meetings of the Group Board and its
Committees. She supports the accurate, timely and clear flow of information to and from the Group Board and
its Committees, and between Directors and the Management Board and Senior Executives. The Group General
Counsel and Company Secretary leads the legal function and advises the Group Board on corporate governance
issues and is responsible for administering Bakkavor’s Share Dealing Code and organising the AGM.
GOVERNANCE
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CORPORATE GOVERNANCE REPORT
CONTINUED
The Group Board continuously evaluates the
balance of skills, experience, diversity, knowledge
and independence among the Directors.
GROUP BOARD COMPOSITION
The Group Board consists of three Executive Directors and
eight Non-executive Directors. The biographical details
of each of the Directors, along with each of their individual
dates of appointment, are set out on pages 94 to 96.
MEETING ATTENDANCE
The Group Board held eight scheduled meetings during the
year, and individual attendance is set out below.
Sufficient time is provided, periodically, for the Chairman to
meet privately with the Senior Independent Director and the
Non-executive Directors to discuss any matters arising.
CURRENT DIRECTORS EXCEPT AS NOTED
Group Board
Annual
General
Meeting
Total number of meetings in 2021 8 1
Scheduled
meetings
eligible to
attend
Scheduled
meetings
attended
Executive Directors
Agust Gudmundsson 8 8 1
Ben Waldron 8 8 1
Mike Edwards 8 8 1
Non-executive Directors
Simon Burke* (Chairman) 8 8 1
Sanjeevan Bala*
1
2 2 1
Umran Beba* 8 8 1
Jill Caseberry*
2
6 6 1
Patrick L. Cook 8 8 1
Lydur Gudmundsson 8 8 1
Denis Hennequin* 8 8 1
Jane Lodge* 8 8 1
*Considered to be independent.
1 Sanjeevan Bala was appointed to the Group Board on 1 August 2021.
2 Jill Caseberry was appointed to the Group Board on 1 March 2021.
GROUP BOARD SKILLS AND EXPERTISE
In light of the current and future needs of the Group Board,
part of the role of the Chairman and the Nomination and ESG
Committee is to maintain a balance of skills and expertise on
the Group Board and to make recommendations to the Group
Board where changes are required to maintain that balance.
The Group Board considers that the skills, experience and
backgrounds of the Directors are sufficiently relevant and
complementary to allow oversight, challenge and review
of Bakkavor’s progress in achieving its corporate goals.
For information on the skills and experience of each Director
and appointments to the Group Board see pages 94 to 96 and
page 108 to 111 of the Nomination and ESG Committee report.
GROUP BOARD SUCCESSION AND CHANGES TO THE GROUP BOARD
For information about Group Board succession and changes
to the Group Board please see pages 108 to 111 of the
Nomination and ESG Committee report.
GROUP BOARD INDUCTIONS
Following appointment, each Director receives a comprehensive
and formal induction to familiarise them with their duties
and Bakkavor’s business operations and risk and governance
arrangements. The induction programme, which is
co-ordinated by the Chief People Officer and the Group General
Counsel and Company Secretary, includes briefings on
industry and regulatory matters relating to Bakkavor, site
visits, and face-to-face meetings with the Management Board,
Senior Executives and different teams within the business.
ONGOING PROFESSIONAL DEVELOPMENT
In order to facilitate greater awareness and understanding
of Bakkavor’s business and the environment in which it
operates, all Directors are given regular updates on changes
and developments in the business. Over the course of the
year, Directors will continually update and refresh their skills
and knowledge and seek independent professional advice
when required.
The Board received presentations throughout the year from
various departments within the business on key topics,
including financial performance, human resources, legal,
audit, risk and compliance, food safety, health and safety,
sustainability, investor relations, corporate governance and
corporate finance.
ANNUAL REELECTION OF THE GROUP BOARD
The rules governing the appointment and replacement of
Directors can be found in the Articles of Association, the 2018
Code, the Companies Act 2006 and related legislation.
Under the terms of the Nomination and ESG Committee,
any appointment must be recommended by the Nomination
and ESG Committee for approval by the Group Board.
All Directors are subject to annual election or re-election. The
Notice of AGM papers accompanying the resolutions for the
election or re-election of each Director sets out the specific
reasons why the Director’s contribution is, and continues to be,
important to the Company’s long-term sustainable success.
In compliance with the 2018 Code, all Directors will retire
and offer themselves for election or re-election, as appropriate,
on an annual basis. At our fourth AGM, held on 20 May 2021,
each Director offered himself or herself for election or re-
election as a Director. All Directors will retire at the 2022 AGM
to be held on 25 May 2022 and offer themselves for election or
re-election, as appropriate.
Composition, succession and evaluation
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PROCESS
The internal Group Board and Committee evaluation process
was undertaken in 2021 based on a questionnaire which
covered the following topics:
Board Composition and Culture: Composition, Leadership,
Dynamics and Decision-making.
Board Oversight: Strategy, Performance, Risk and People.
Stakeholders: Shareholders, Customers and Suppliers,
Other Stakeholders and ESG, Purpose, Values and Culture.
Board Efficiency: Board Meetings, Agendas and Minutes
and Secretariat.
Committees: Audit and Risk Committee, Nomination and
ESG Committee and Remuneration Committee.
The internal review was facilitated by the General Counsel and
Company Secretary who is considered a suitable person to
conduct this process. The questionnaire was completed by all
Group Board members and a report on the outcome of the
evaluation exercise was prepared by the General Counsel and
Company Secretary and presented to the Group Board.
Group Board evaluation insights
The report concluded from the feedback received from the
questionnaire that the Group Board was working well. It was
recognised that continued COVID-19 lockdown restrictions
meant there were restrictions on in-person meetings between
Group Board members and site visits during the year. These
would be scheduled for 2022.
COMMITTEES
The Group Board Committees were also reviewed and,
overall, were considered to function well in terms of their
effectiveness, decision-making and the rigorous manner in
which they addressed all issues brought to their attention.
DIRECTORS
The performance of each Director was considered to be
effective and both the Group Board and its Committees
continue to provide effective leadership and exert the required
levels of governance and control.
CHAIRMAN
The Chairman was considered to provide robust leadership
for the Group Board.
The Group Board will continue to review its procedures,
effectiveness and development in the year ahead.
As well as considering the results of this year’s performance
evaluation, the Group Board also reviewed performance
against the areas identified in the 2020 independent external
evaluation undertaken by Clare Chalmers Limited, an
independent provider of board evaluations, with no
connections to the Group or any individual Directors.
The recommendations are summarised below:
2020 External Board
evaluation recommendation Actions – 2021
Review of Group Board and
Committee composition. The
Company has commenced, with
the assistance of an independent
external executive search
consultancy, the recruitment
of an additional independent
Non-executive Director.
With the support of Russell Reynolds
Associates, Jill Caseberry and Sanjeevan
Bala joined the Group Board as
independent Non-executive Directors
during the year. Jill was appointed as a
member of the Remuneration Committee
and Nomination and ESG Committee and
Sanjeevan Bala was appointed as a
member of the Audit and Risk Committee.
As a result of this, the Company now has
the appropriate balance of independent
Non-executive Directors on the Group
Board and its Committees.
Greater use of informal pre-
Board discussions to enable
engagement with different
parts of the business.
Informal pre-Board discussions were
scheduled throughout the year with
presentations to the Group Board on
marketing, colleague engagement,
commercial strategy and international
business review to enable the Group
Board to engage with different parts
of the business.
Increasing level of engagement
with the Senior Executives.
The Group Board received presentations
from the Senior Executives throughout the
year on a wide range of topics, including
UK Supply Chain, Health and Safety and
Food Safety and ESG.
Review Board reporting of risk. Risk reporting was reviewed and has been
enhanced to introduce targets for key risk
indicators in relation to the risk appetite
for each principal risk, and on a quarterly
basis, report on the position of each
principal risk on the heat map in order to
increase the clarity on risk movements.
Site visits by the Group Board
to be scheduled when COVID-19
lockdown restrictions are
eased (in the meantime
engaging with sites remotely).
The continued COVID-19 lockdown
restrictions meant that the Group Board
(with the exception of the designated
workforce engagement Non-executive
Director in February 2022) did not attend
any site visits. Site visits for the Group
Board will be scheduled in 2022.
Focus on Strategy Day in
early 2021 to review the
Group’s strategic priorities
and future capital plans to
underpin this strategy.
The Group Board took part in a Strategy
Day in March 2021 which enabled it to
review the strategic priorities and future
capital plans to underpin this strategy.
The strategy was further reviewed in H2
in light of supply chain issues, labour
shortages and inflation.
STAGE 1
Group Board
to complete
questionnaires
Internal Group Board and Committee evaluation
STAGE 2
Results
collated, reported
and evaluated
STAGE 3
Presentation to
the Group Board
and discussion
STAGE 4
Action
plan
agreed
GOVERNANCE
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REPORT OF THE NOMINATION AND ESG COMMITTEE
As Chairman of the Nomination and ESG
Committee (“the Committee”), I am pleased
to present the report of the Committee for
the period ended 25 December 2021.
This was a busy year for the Committee as we continued
to focus on the Group Board composition and succession
planning and the Group Board Committees’ composition
and membership, which resulted in the appointment of
two Independent Non-executive Directors.
During the year, we strengthened the Group’s governance
of ESG, and expanded the remit of the Committee so that
it monitors the execution of the Trusted Partner strategy,
oversees the communication of the Group’s ESG activities
with its stakeholders and provides input to the Group Board
and its Committees on ESG matters as required. In addition,
I am delighted that Umran Beba has taken on the role of
designated Non-executive Director for ESG matters and
feeds back to the Group Board meetings on all ESG matters
and the oversight of the execution of the Group’s Trusted
Partner ESG strategy.
The Committee reviewed Management Board and Senior
Executive succession planning and oversaw a number of
initiatives in response to feedback received in the Employee
Engagement Survey, which included the introduction of
Bakkavor’s refreshed values, leadership training and the
Executive Leadership Development Programme. Inclusion
and Diversity remained a key area of focus for the
Committee, and we reviewed Group Board diversity, the
Group’s Inclusion and Diversity Policy and a number of
Inclusion and Diversity initiatives held during the year.
For more information please see page 47.
COMMITTEE MEMBERSHIP
I was delighted to welcome Jill Caseberry as a member
of the Committee and the Company’s designated workforce
engagement Non-executive Director, effective from August
2021. The Committee currently comprises three Independent
Non-executive Directors, namely, Umran Beba, Jill
Caseberry and Denis Hennequin and one Non-independent
Non-executive Director, Lydur Gudmundsson, and myself
as Chair. For the purposes of Committee membership, the
Chair of the Group Board is not deemed as independent.
The Committee considers that the membership of the
Committee is well balanced in terms of skills, knowledge,
effectiveness and experience. Detailed information on the
experience, skills and qualifications of the Committee
members can be found on pages 94 to 96.
MEETINGS DURING THE YEAR
The Committee held two meetings during the year and
the Committee also received a written status update from
the Chief People Officer. Details of individual attendance
at the meetings are set out below.
Committee meetings and membership
Member Member since
Scheduled
meetings
eligible to
attend
Scheduled
meetings
attended
Simon Burke (Chair) 19 October 2020 2 2
Umran Beba 1 September 2020 2 2
Jill Caseberry
1
13 August 2021 1 1
Lydur Gudmundsson 20 October 2017 2 2
Denis Hennequin 20 October 2017 2 2
1 Jill Caseberry was appointed to the Group Board on 1 March 2021 and became a
member of the Committee and the Company’s designated workforce engagement
Non-executive Director on 13 August 2021.
The Group General Counsel and Company Secretary attends
all Nomination and ESG Committee meetings to record
meetings and provide advice to the Directors. The Chief People
Officer is invited to regularly attend and provide updates
on topics such as succession planning, talent acquisition,
learning and development and colleague engagement.
To ensure the Committee discharges its responsibilities
appropriately, a schedule of meetings, linked to the
Committee’s Terms of Reference, is approved by the
Committee. Following each Committee meeting, I report
to the Group Board on the activities of the Committee and
make recommendations to the Group Board as appropriate.
ROLE OF THE COMMITTEE
The Committee’s role, authority, responsibilities and scope
are set out in its Terms of Reference which are available
on the Bakkavor website at www.bakkavor.com/investors/
governance. The Committee reviews the Terms of Reference
annually. The Terms of Reference were updated and
approved by the Committee in January 2021 and last
updated and approved by the Committee in November 2021.
COMMITTEE EVALUATION
During the year, the Committee undertook an internal
evaluation of the effectiveness of the Board and that of its
Committees and individual Directors in accordance with
the requirement of the 2018 Code and recommendations
of the Financial Reporting Council’s Guidance on
Board Effectiveness.
The evaluation indicated that the Committee continues to
operate effectively and efficiently and has the skills and
expertise required in order to perform its role appropriately.
Further details of the evaluation are included under ‘Board
evaluation insights’ on page 107.
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The Nomination and ESG Committee
reviews the structure, size and
composition of the Group Board, and
makes recommendations to the Group
Board on new appointments of Executive and
Non-executive Directors. It is also responsible
for the governance and oversight of ESG matters.
Simon Burke
Chair, Nomination and ESG Committee
DETAILS OF KEY ACTIVITIES DURING THE YEAR
How the Committee has discharged its
responsibilities during the Full-Year 2021
Key areas of focus
GROUP BOARD COMPOSITION
In January 2021, the Committee undertook a review of the Group
Board’s composition to identify the steps to be taken to ensure
compliance with the 2018 Code. At that time, the Company was
not compliant with Provision 11 of the 2018 Code, as less than
half of the Group Board was made up of Independent Non-
executive Directors, and as a result, lacked the appropriate
balance of Executive and Independent Non-executive Directors.
In order to achieve the required balance under this provision, the
Committee led the process for the appointment of two additional
Independent Non-executive Directors to the Group Board.
GROUP BOARD APPOINTMENTS
Prior to making new appointments to the Group Board, the role
profile for proposed new Directors is prepared on the basis of
the criteria laid down by the Committee, taking into account
the Group Board Knowledge and Skills matrix which identifies
key areas of diversity, skill or experience that would add to
the effectiveness and reach of the Group Board. In all Director
recruitment activity, the Committee ensures a formal and
rigorous selection process is followed and employs the services
of an experienced independent search consultant (who has
no affiliation with the Group nor any individual Director and
who has adopted the Voluntary Code of Conduct for Executive
Search Firms on gender diversity and best practice). A longlist
of candidates is reviewed by the Committee and reduced to a
credible shortlist of candidates who are then interviewed by
members of the Committee. The ideal candidate is then
recommended to the Group Board for formal approval.
Following a rigorous selection process, conducted with the
assistance of Russell Reynolds Associates, an independent
external search consultant, which has no other affiliation
with the Group nor any individual Director, Jill Caseberry
was appointed as an Independent Non-executive Director,
effective from 1 March 2021, and Sanjeevan Bala was
appointed as an Independent Non-executive Director,
effective from 1 August 2021.
Sanjeevan Bala will be standing for election at the Annual
General Meeting on 25 May 2022 and all other Directors will be
standing for re-election. The Group Board has set out in the
Notice of the Meeting its reasons for supporting the election
and re-election of the Directors and their biographical details
on pages 94 to 96 demonstrate the range of experience and
skills which each brings to the benefit of the Company.
GROUP BOARD COMMITTEES’ COMPOSITION
In January 2021, a comprehensive review was undertaken
on each of the Non-executive Directors’ experience and core
competencies, Committee membership, the Committees’
compositional requirements under their Terms of Reference,
as well as the provisions of the 2018 Code in respect of
Committee membership.
Key activities during the year
Group Board and Committee composition
• Reviewed Group Board and Committee composition.
• Recommended for approval by the Group Board the appointment
of two additional Independent Non-executive Directors.
Group Board appointments
• Ensured there is a formal, rigorous, and transparent procedure
for the appointment of new Directors to the Group Board and
Management Board.
Non-executive Directors
• Reviewed the continued independence of the Non-executive
Directors.
• Reviewed Non-executive Director time commitments.
• Monitored the induction of the two additional independent
Non-executive Directors.
Succession planning
• Reviewed and updated succession plans for the Group Board,
Management Board and Senior Executives.
• Implemented the Front Line Leaders Development Programme
and Executive Leadership Development Programme.
Engagement and wellbeing in our workplaces and communities
• Reviewed feedback from the 2021 Employee Engagement Survey
and oversaw actions in response to feedback received.
• Received regular updates on engagement and wellbeing in our
workplaces and communities.
• Monitored the launch of the Wellbeing Strategy.
Inclusion and diversity
• Reviewed Group Board diversity and the Group’s Inclusion and
Diversity Policy.
• Received updates on the 2021 Inclusion and Diversity initiatives,
including World Day for Cultural Diversity, Pride Month, Disability
Awareness Day and National Inclusion Week.
• Reviewed and agreed 2022 Inclusion and Diversity initiatives.
ESG governance
• Monitored and oversaw the execution of Trusted Partner and the
work of the Group ESG Executive Committee.
• Recommended the appointment of the designated Non-executive
Director for ESG matters.
• Received quarterly updates on ESG progress and initiatives.
• Updated the Committee’s Terms of Reference to reflect additional
ESG responsibilities.
Governance and Group Board and Committee evaluation
• Received regular updates on corporate governance developments.
• Reviewed the internal Group Board and Committee evaluation
report and considered the recommendations.
GOVERNANCE
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2021 EMPLOYEE ENGAGEMENT SURVEY
The Committee discussed the 2021 Employee Engagement
Survey and oversaw the following actions in response to
feedback received by colleagues in relation to Bakkavor’s
values and learning and development opportunities:
Refreshing our values
The Committee oversaw the introduction of Bakkavor’s
refreshed values with a focus on working together, being
open and honest with each other and ensuring we treat all
colleagues the same. For more information on our values
which drive our long-term culture, see pages 16 to 17.
Talent and leadership training and development
The Committee reviewed the Group’s leadership framework
which was launched to help Bakkavor’s leaders understand
the drivers in building high-performing, engaged teams and
oversaw the launch of the new leadership development
programme targeted at all of our front-line leaders in roles
such as Operational Section Management, Engineering,
Quality, Hygiene and other operational disciplines. The Group
also uses an e-learning platform to equip our current and
future business leaders with tools to develop their personal
and professional leadership skills.
The Committee monitored the launch of the Executive
Development Programme, a 12-month programme of modules
and coaching sessions to develop Bakkavor’s most senior leaders.
ENGAGEMENT AND WELLBEING IN OUR WORKPLACES
AND COMMUNITIES
Engagement and wellbeing in our workplaces and
communities is a focus area in our Trusted Partner ESG
strategy and it addresses four material issues: Colleague
Wellbeing, Health and Safety; Responsible Recruitment and
Employment; Engagement, Development and Retention; and
Local Causes and Community Engagement. The Committee
received regular updates on these issues during 2021 as well
as reviewing the Wellbeing Strategy; the Engagement and
Wellbeing objectives; and the Engagement calendar for 2022.
INCLUSION AND DIVERSITY
The success of the business relies on the skills, experience
and commitment of the diverse range of people who work for
the Company. All appointments, including recruitments and
internal promotions, are based on merit, qualification and abilities,
and are not influenced by race, colour, nationality, religion or
belief, gender, marital status or civil partnership, family status,
pregnancy or maternity, sexual orientation, disability or age.
However, simply having a diverse workforce is not enough. We
want to create an equal and inclusive workplace where colleagues
feel valued, included and inspired to perform their best.
Our Inclusion and Diversity Policy was launched in 2020
and its three objectives are i) living the Bakkavor values;
ii) building an inclusive and diverse workforce across all
levels of the organisation; and iii) providing opportunity
for colleagues to succeed.
REPORT OF THE NOMINATION AND ESG COMMITTEE
CONTINUED
Following on from this, the Committee recommended to the
Group Board for approval, the appointment of Jill Caseberry
as a member of the Remuneration Committee, effective from
1 March 2021 and as the Company’s designated workforce
engagement Non-executive Director and a member of
the Committee, effective from 13 August 2021, and the
appointment of Sanjeevan Bala as a member of the Audit
and Risk Committee, effective from 1 August 2021.
NONEXECUTIVE DIRECTORS
Consideration was given by the Committee to the continued
independence of the Non-executive Directors, including their
term in office, the time commitment required from each
of them, taking into account the number of meetings and
preparation and attendance at those meetings. It was
concluded that all Non-executive Directors remained
independent (excluding Lydur Gudmundsson and Patrick L.
Cook) and all Non-executive Directors devoted an
appropriate amount of time to fulfil their responsibilities.
The Committee considered the Non-executive Directors’
time commitment, and it is pleased to note that there are
no over-boarding concerns at the current time. It believes
that the Non-executive Directors have sufficient time to
be effective representatives of stakeholders’ interests.
SUCCESSION PLANNING
During the year, the Committee reviewed succession planning
at Group Board, Management Board and Senior Executive
level to ensure there is a diverse pipeline for succession,
taking into account the skills and expertise required by the
Company. The review included arrangements relating to
contingency planning for sudden and unforeseen departures
to ensure the orderly replacement of current Group Board and
Management Board members and Senior Executives (e.g.
retirement) and medium to long-term planning which focused
on identifying potential candidates within the Group for
progression and areas where external recruitment may be
required for the replacement of Management Board members
and Senior Executives. The result of this work highlighted that
we have robust plans for our key roles across the business,
supported by our Executive Development Programme.
Group Board
The Committee reviewed the Group Board Knowledge and
Skills matrix which is used to inform the Group Board
recruitment criteria and is confident that the Group Board
has the necessary mix of skills and experience to contribute
to the Company’s strategic objectives.
Management Board
The Committee reviewed the succession planning for the
Management Board which was aligned to the Company’s
talent principles and a new performance rating scale was
introduced during the year, designed to clearly differentiate
between different types of performance alongside the
Company’s potential ratings guidance.
Senior Executives
The Committee’s succession planning review for Senior
Executives considered longer-term planning focused on
identifying potential candidates within the Group for progression
and areas where external recruitment may be required.
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Following the launch of the Inclusion and Diversity Policy, the
Committee oversaw the launch of the Inclusion & Diversity Forum
(“the Forum”) at the beginning of 2021. The Forum is chaired
by the Group General Counsel and Company Secretary and
represented by individuals from every level of the organisation
and for 2021 set the focus on gender diversity and increasing
support for female leaders in their career aspirations. The
Committee received regular updates on the work of the Forum
throughout the year, which included the launch of a Female
Mentoring programme to lay the foundations of a three-year plan
to drive and accelerate gender equality within the organisation.
The Forum also co-ordinated action around a number of key
events through the year, including World Day for Cultural
Diversity, Pride Month, Disability Awareness Day and National
Inclusion Week. These events were celebrated through a
range of site and business-level activities, such as cultural
sharing events, educational webinars, shared learning
sessions and communication of relevant policies.
Group Board diversity
The Committee recognises the importance of diversity and
understands the significant benefits that come with having
a diverse Board. The Committee believes that diversity is a
wider issue than race and gender, and includes variations in
experience, skills, personal attributes, and background. The
Company’s third gender pay report, which identifies the areas
on which the Company has focused, can be found on page 52.
Two new Non-executive Directors were appointed to the Group
Board during the year. In addition to the diverse wealth of
skills and experience they bring, our newest Group Board
members contribute to the improving trend line in gender and
ethnic diversity, which are two key objectives for Bakkavor’s
Group Board. The Committee is proud of its progress in this
area and is pleased that Bakkavor is compliant with the
recommendations of the Parker Review. The Group Board
will continue to appoint on merit, based on the skills and
experience required for membership of the Group Board,
being mindful of the Hampton-Alexander and Parker Reviews
when considering future appointments and giving
consideration to all forms of diversity when the Committee
reviews the Group Board’s composition.
The Company ensures that during the recruitment of Non-
executive Directors, the longlists of potential candidates reflect
the Group Board’s diversity commitments in respect of gender
and ethnicity. All longlists of potential appointments include at
least 50% female candidates, and the Company is committed
to ensuring that candidates from all ethnicities are considered.
For appointments to the Group Board, the Company uses
executive search consultancies who have signed up to the
Voluntary Code of Conduct for Executive Search Firms, setting
out the key principles of best practice in the recruitment
process. These principles include a recommendation that
search firms should consider gender diversity.
ESG
During the year, we have strengthened the Group’s governance
of ESG, and expanded the remit of the Committee in the second
half of the year so that it monitors the execution of the Trusted
Partner strategy and oversees the communication of the
Group’s Trusted Partner activities with its stakeholders.
Environmental
As referred to on page 35, our climate change roadmap has
been a primary focus. We committed to Net Zero emissions
in our Group-wide operations by 2040, and we have had to
quickly embed this goal in our business. This continues to
involve bringing together key stakeholders from across the
business to understand what this commitment means for our
long-term strategy, energise thinking around our response
and planning the roll-out of the roadmap across the business
and to support delivery.
Our Net Zero emissions roadmap – which you can read about
on page 59 in our TCFD report – is a work in progress, which
provides us with the structure we need to push on and work
towards our goal.
The Committee will receive regular updates on environmental
issues such as: Responsible Sourcing (supply chain human
rights, environmentally sustainable sourcing and ingredient
traceability and integrity) and Sustainability and Innovation
(food and other waste, resource efficiency and emissions,
impact of packaging and product innovation).
Social
The work of the Committee during the year is outlined above
and included the oversight of the social aspects of ESG, with
the Committee receiving updates on colleague wellbeing,
colleague engagement, development and retention,
succession planning and Inclusion and Diversity initiatives
and activities undertaken at local sites.
Governance
The Committee will be provided with quarterly updates,
including the prioritisation of ESG workstreams during the
relevant quarter, and will provide input to the Group Board
and its Committees on ESG matters as required. In addition,
Umran Beba has taken on the role of designated Non-
executive Director for ESG matters and will feed back to the
Group Board meetings on all ESG matters and the oversight
of the execution of the Group’s Trusted Partner ESG strategy.
Corporate governance
The Committee received regular updates on corporate
governance developments from the Group General Counsel
and Company Secretary and know-how training from external
legal advisers.
Simon Burke
Chair, Nomination and ESG Committee
7 March 2022
GOVERNANCE
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AUDIT, RISK AND INTERNAL CONTROL
ACCOUNTABILITY
Disclosure Guidance and Transparency Rules (DTR) 7.2.6
and the Large and Medium-sized Companies and Groups
(Accounts and Reports) Regulations 2008 (SI 2008/410)
Disclosures required under DTR 7.2.6 and the Large and
Medium-sized Companies and Groups (Accounts and Reports)
Regulations 2008 (SI 2008/410), providing information on major
interests in shares, the Company’s Articles of Association, share
capital and capital structure, restrictions attaching to shares and
the powers of the Company issuing or buying back shares can
be found on pages 143 and 144 of the Directors’ Report.
AUDIT, RISK AND INTERNAL CONTROL
Risk management and internal control
The Board has overall responsibility for the Group’s system of
internal control and risk management. It ensures the effective
identification and management of key strategic and emerging
risks, and for the review and approval of the ongoing risk
management process, including clear policies that outline
what can be considered an acceptable level of risk.
The Group Board has established procedures:
• To manage risk, oversee the internal control framework and
determine the nature and extent of the principal risks the
Company is willing to take in order to achieve its long-term
strategic objectives.
• For ensuring the maintenance of the Group’s risk management
and internal control systems and reviewing them annually.
The framework under which risk is managed in the business
is supported by a system of internal controls designed to
embed the effective management of the key business risks
throughout the Group.
For further details of the Group Board’s approach to risk
management see pages 72 to 87 in the Risk Management
and Risks section of the Annual Report.
The Audit and Risk Committee, delegated by the Group Board,
reviews the effectiveness of the Group’s risk management
process and internal control system and receives regular
reports from management and both Internal and External
Auditors. These detail the risks that are relevant to business
activity, the effectiveness of internal controls in dealing with
these risks and an update on the implementation of any
corrective actions that are considered necessary. The Audit
and Risk Committee reports to the Group Board on the
effectiveness of the risk management process.
The principal risks and uncertainties facing the Group are set
out on pages 78 to 86 and form part of the Directors’ Report.
Whilst the Group Board as a whole is responsible for the Group’s
system of internal control, day-to-day risk management is led
by Senior Management with ownership for individual risks, as
identified in the Risk Register, assigned to a member of the
Senior Management team. Management of risk is embedded
in daily working practices and underpinned by Bakkavor’s
policies and Code of Conduct and Business Ethics.
Where risks are identified, action plans are developed to
mitigate each risk, with clear allocation of responsibilities and
timescales for completion. Progress towards implementing
these plans is monitored and reported back to the Group
Board through the Audit and Risk Committee, as part of a
structured business review.
The process for identifying, evaluating and managing the
principal risks has been in place throughout the financial year.
Up to the date of the approval of the Annual Report and Financial
Statements, the process accords with the Financial Reporting
Council (“FRC”) Guidance on Risk Management, Internal Control
and Related Financial and Business Reporting and is regularly
reviewed by the Group Board and the Audit and Risk Committee.
On a regular basis, the risks faced by the Group are reviewed
with management and also the Audit and Risk Committee.
The internal control system provides Senior Management with
an ongoing process for risk management. The system can
only provide reasonable, and not absolute, assurance, as it is
designed to manage rather than eliminate all risks.
In analysing and reviewing risk, the Audit and Risk Committee
and the Board consider:
• The nature and extent of the risks, including principal risks,
facing the Group, as well as emerging risks;
• The extent and categories of risks it regards as desirable or
acceptable for the Group to bear;
• The likelihood of the risk concerned materialising and the
impact of associated risk materialising as a consequence;
• The Group’s ability to reduce the incidence and impact on its
business of risks that do materialise;
• The operation of the relevant controls and control processes;
• The costs of operating particular controls relative to the
benefits in managing related risks; and
• The Group’s risk culture.
The Directors confirm that the Group Board has carried out a
robust assessment of the principal and emerging risks facing the
Group, including those that would threaten its business model,
future performance, solvency and liquidity. No significant failings
or weaknesses were identified in the Group Board’s assessment
of the Group’s systems of risk management or internal control.
Internal controls over financial reporting
The Group’s financial reporting process has been designed to
provide assurance regarding the reliability of the financial
reporting and preparation of its Financial Statements, including
Consolidated Financial Statements, for external purposes in
accordance with International Financial Reporting Standards
(“IFRS”). The annual review of the effectiveness of the Group’s
system of internal controls included reviews of systems and
controls relating to the financial reporting process.
Internal controls over financial reporting include procedures
and policies that:
• Pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions of the Group.
• Provide reasonable assurance that transactions are recorded
as necessary to allow the preparation of Financial Statements
and that receipts and expenditures are being made only in
accordance with authorisations of management and Directors.
• Provide reasonable assurance regarding prevention or timely
detection of unauthorised acquisition, use or disposal of Group
assets that could have a material effect on the Group’s financial and
operational controls and compliance with laws and regulations.
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REPORT OF THE AUDIT AND RISK COMMITTEE
I am pleased to report on the activities of the
Audit and Risk Committee (“the Committee”)
for the period ended 25 December 2021.
During the year, the Committee focused on its core
responsibilities of supporting the Group Board and protecting
the interests of shareholders in relation to financial reporting
and internal control. This has been achieved by ensuring that
the Group has in place a robust risk management process and
an effective internal control framework to manage its risks and
the required processes to enable going concern and viability
confirmations to be made. In addition, the Committee has
continued to focus on ensuring the integrity, quality and
compliance of the Group’s external financial reporting.
This year has seen industry-wide supply chain and labour
challenges, as well as the continuing impact of the COVID-19
pandemic and Brexit implications. The Committee focused
its attention on challenging and supporting management’s
response to these issues by ensuring that the ongoing risks
and the relevant mitigating actions have been appropriately
modelled and managed.
The Committee also reviewed the alignment of ESG focus
areas and ESG material issues to the Group’s principal risks
and assessed the business’s exposure to climate-related
risks set out on page 56. In addition, the Committee
reviewed the Group’s financial reporting approach to the
recommendations of the Task Force on Climate-related
Financial Disclosures (“TCFD”) which the Group has
voluntarily followed this year.
COMMITTEE MEMBERSHIP
I was delighted to welcome Sanjeevan Bala as a member
of the Committee in August. The Committee currently
comprises three Independent Non-executive Directors,
namely Denis Hennequin, Sanjeevan Bala and myself as
Chair. As a whole, the Committee possesses the skills,
competence and relevant financial and commercial
expertise to enable it to discharge its responsibilities in
a robust and independent manner. Detailed information
on the experience, skills and qualifications of all the
Committee members can be found on pages 94 to 96.
The Group Board is satisfied that, with my 25 years at
Deloitte LLP, I have significant financial experience in the
UK listed environment, and the necessary qualifications,
skills and experience to fulfil my role as the Committee Chair.
MEETINGS DURING THE YEAR
The Committee held five meetings during the year, and details
of individual attendance at the meetings are set out below.
Committee meetings and membership
Member Member since
Scheduled
meetings
eligible to
attend
Scheduled
meetings
attended
Jane Lodge (Chair) 3 April 2018 5 5
Sanjeevan Bala
1
1 August 2021 2 2
Denis Hennequin 20 October 2017 5 5
1 Sanjeevan Bala was appointed to the Board on 1 August 2021.
The Committee discharges its responsibilities through a
series of scheduled meetings during the year, the agendas
for which include risk assessment and management
processes, the programme of Internal Audit and assurance
work, in-depth discussions on key financial and other risk
areas, and work related to events in the financial calendar
of the Company and the programme of External Audit work.
Only Committee members have the right to attend meetings,
but the Chief Financial Officer, the Group Financial Controller,
the Group Head of Risk, the Internal Auditors (KPMG) and the
External Auditors (PwC) are invited to attend meetings of the
Committee as the Committee feels appropriate.
The Committee also meets privately, without management
present, and receives regular updates from other business areas
at several of its meetings. It reviews other additional matters
when considered necessary. I meet with the External Auditors
and Internal Audit, without management present, on a regular
basis in order to discuss any issues which may have arisen.
To ensure the Committee discharges its responsibilities
appropriately, a schedule of meetings, linked to the
Committee’s Terms of Reference and covering key events in
the financial reporting cycle, is approved by the Committee.
Following each Committee meeting, I report to the Group
Board on the activities of the Committee and make
recommendations to the Group Board as appropriate.
ROLE OF THE COMMITTEE
The Committee’s role, authority, responsibilities and scope are
set out in its Terms of Reference which are available on the
Bakkavor website at www.bakkavor.com/investors/governance/
default.aspx. The Committee reviews the Terms of Reference
annually. The Terms of Reference were last updated in
February 2021.
COMMITTEE EVALUATION
During the year, the Committee undertook an internal
evaluation of the effectiveness of the Board and that of its
Committees in accordance with the requirement of the 2018
Code and recommendations of the Financial Reporting
Council’s (“FRC”) Guidance on Board Effectiveness.
The evaluation indicated that the Committee continues to
operate effectively and efficiently and has the skills and
expertise required in order to perform its role appropriately.
Further details of the evaluation are included under ‘Board
evaluation insights’ on page 107.
GOVERNANCE
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REPORT OF THE AUDIT AND RISK COMMITTEE
CONTINUED
Integrity of Financial Statements
• Reviewed the Group’s accounting policies to ensure they remain
appropriate and have been consistently applied.
• Reviewed and challenged the key financial reporting judgements
and estimates and concluded that accounting treatments were
appropriate.
• Reviewed and challenged the Group’s financial reporting disclosures
for TCFD.
• Reviewed and concluded that the Financial Statements and narrative
reporting are fair, balanced and understandable.
• Reviewed and concluded that the Group is both a going concern over
a period of 12 months from the date of approval of the Financial
Statements and viable over the three-year review period, including
consideration of the impact of historical forecasting inaccuracy,
ongoing COVID-19 restrictions, labour availability and further raw
material inflation.
Internal controls and risk management
• Reviewed the Group’s internal controls and risk management
systems including those for assessing emerging risks and concluded
that they are operating effectively.
• Supported the Board in its assessment of risk appetite and
development of a Group Risk Appetite Statement.
• Reviewed the alignment of ESG issues and risks to the Group’s
principal risks.
• Reviewed the Group’s assessment of its exposure to climate-
related risks.
• Reviewed and updated, where necessary, the Committee’s
Terms of Reference.
The Audit and Risk Committee’s remit covers
accounting and financial reporting, the effectiveness of
internal controls, identification and management of
risks and the External and Internal audit processes.
Jane Lodge
Chair, Audit and Risk Committee
External Audit
• Reviewed and was satisfied with the effectiveness of the
External Audit process.
• Approved the terms of engagement and remuneration of the
External Auditors.
• Monitored the independence of the External Auditors.
• Reviewed and approved the External Audit plan for the coming year.
Internal Audit
• Reviewed and challenged the work of Group‘s Internal Audit function
(KPMG) and concluded that it is operating effectively.
• Reviewed and approved the Internal Audit Charter.
• Reviewed and approved the Internal Audit plan for the coming year.
Key activities during the year
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DETAILS OF KEY ACTIVITIES DURING THE YEAR
How the Committee has discharged its responsibilities during the Full-Year 2021
Key areas of focus
The Committee has an extensive agenda which focuses on the audit, assurance and risk management processes within the
business. During the Full-Year 2021, the work of the Committee principally fell under the following key areas:
Key areas of focus Matters considered
Financial reporting The Committee reviewed the form and content of the Annual Report and Financial Statements as well as the half-year and full-year
results statements, including the key estimates and judgements made by management in the preparation of the Financial Statements.
In order to fulfil these duties, during the year under review, the Committee:
• Considered the implications of ongoing COVID-19 restrictions, labour availability and further raw material inflation on the full-year financial
statements, including the presentation of the relevant costs.
• Considered the implications of COVID-19 on the half-year and full-year results timetables and the changes in reporting processes due to
remote working and ensured that adequate review processes were in place.
• Reviewed and challenged management on the appropriateness of estimates and judgements made in the preparation of the Financial
Statements, including financial reporting and disclosure considerations in respect of climate change.
• Reviewed the critical judgements and key sources of estimation uncertainty disclosed in the Financial Statements to ensure they fairly
reflected the potential financial impact on the business.
Monitoring the integrity of the Full-Year 2021 Financial Statements including significant judgements
The Committee:
• Reviewed the appropriateness of Group accounting principles, practices and policies and monitored changes to, and compliance with, accounting standards on an
ongoing basis.
• Reviewed the half-year and full-year results statements for the Full-Year 2021. Before recommending their release to the Group Board, we compared the results to
management financial statements and budgets, focusing on key areas of judgement and also discussed the statements with the External Auditors.
• Reviewed, prior to making recommendations to the Group Board, the Annual Report and Financial Statements for the period ended 25 December 2021.
In undertaking the review, the Committee discussed with management and the External Auditors the critical accounting policies and issues considered most
significant in preparing the Annual Report and Financial Statements.
Going concern • The Committee reviewed the Group’s assessment of going concern which is for a period of 12 months from the date of approval of the Financial
Statements. Management presented a number of stress scenarios to the Committee which considered historical forecasting inaccuracy and
the implications of ongoing COVID-19 restrictions, labour availability and further raw material inflation. The scenario analysis also included the
potential impact from lower sales volumes as a result of an increase in retail pricing in response to COVID-19 restrictions and supply chain
issues. In assessing going concern, the Committee also reviewed the steps taken by management to ensure adequate liquidity is available to
the Group. The Committee concluded that under the scenarios presented, the Group would have sufficient financial resources available to
continue to operate through to at least March 2023 and it was therefore appropriate to recommend the adoption of the going concern basis in
preparing the Financial Statements.
Impairment of
goodwill
and intangible
assets
As at 25 December 2021, the Group had significant amounts of goodwill and intangible assets that are subject to an annual impairment
review under IFRS.
The Committee:
• Reviewed a paper prepared by management that set out the basis and assumptions for the annual impairment review. The paper set out the
determination of cash-generating units (“CGUs”), the cash flow forecasts used and the discount rate to be applied for the purpose of the value-
in-use calculation. The impairment review allowed for the forecasted costs and expenditure required from 2030 for the Group to meet its Net
Zero carbon commitment. The paper also considered downside scenarios if financial performance was below the forecasted amounts. The
impairment review indicated that no impairment provisions were required for the period ended 25 December 2021.
• Reviewed and approved the associated disclosure in the Financial Statements including the sensitivity analysis in respect of the US CGU which
had the lowest level of headroom.
Customer
deduction accruals
The Group has arrangements in place with its customers to provide volume-related rebates and is required to make estimates in
determining the value and timing of accruals for these customer deductions due in respect of sales.
The Committee:
• Reviewed a paper prepared by management that set out the rationale for the calculation and timing of the accruals held under these arrangements
at 25 December 2021. The paper included a summary of the key agreements in place and the level of accruals held across the business.
• Challenged management on the logic that had been applied to determine the level of accruals held under these arrangements at 25 December 2021.
• Acknowledged that this was a highly subjective area that required a significant level of estimates to be made, but concurred with the rationale
applied by management to determine the value of these accruals.
GOVERNANCE
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REPORT OF THE AUDIT AND RISK COMMITTEE
CONTINUED
Key areas of focus Matters considered
Fair, balanced and
understandable
reporting
Each year, in line with Provision 25 of the 2018 Code and the Committee’s Terms of Reference, the Committee is asked by the Group Board
to assess, through discussion with, and the challenge of, the Management Board and Senior Executives, whether disclosures in the
Group’s published Financial Statements were fair, balanced and understandable and whether or not the disclosures provide the
information necessary for shareholders to assess the Group’s position and performance, business model and strategy.
The Committee:
• Received papers on key judgement areas that set out management’s accounting treatment, and also sought and obtained confirmation from
the Chief Financial Officer and his team that they considered the disclosures to be fair, balanced and understandable.
• Discussed this evaluation with the External Auditors, which took this into account when conducting their audit. It also established through
reports from management that there were no indications of fraud relating to financial reporting matters.
• Received a detailed paper covering key points and areas of consideration in the preparation of the Group’s published Financial Statements for
the period ended 25 December 2021, to assist the Committee with its assessment that the disclosures were considered to be fair, balanced and
understandable.
• Having assessed the available information and the assurances provided by management, concluded that the processes underlying the
preparation of the Group’s published Financial Statements were appropriate in ensuring that those statements were fair, balanced and
understandable.
Risk management
and internal
control
The Committee is required to assist the Group Board in the annual review of the effectiveness of the Company’s risk management process
and internal control systems. The Company’s principal risks and uncertainties identified are set out on pages 78 to 86.
In order to fulfil these duties, during the year under review, the Committee:
• Received regular reports and assessments of the current and emerging risks that might threaten the Group’s business model, future
performance or liquidity.
• Received reports on the risk management and mitigation for health, safety & environment and food safety, IT risks (cyber security risks and
business continuity), climate change and sustainability risks and tax (including approval of the Group Tax Strategy and Policy).
• Considered and challenged management on the overall effectiveness of the risk management and internal control systems in accordance with
the Group Board’s risk appetite.
• Reviewed relevant disclosures within the ‘Audit, risk and internal control’ section of the Corporate Governance Report which can be found on
page 112 of the Annual Report and Accounts.
• Reviewed and approved the Internal Audit Plan for 2022, which sets out the planned activities for the year ahead.
In light of the above, the Committee continues to be satisfied that the Group control environment remains appropriate and effective and
has reported this opinion to the Group Board.
Principal risks
and viability
The Committee reviewed and approved the principal risks and uncertainties disclosures on page 76 of the Annual Report and Accounts
and the Viability Statement on page 87 of the Annual Report and Accounts.
The Committee:
• Approved a change of description of the following principal risks; ‘Supply chain’ replaces ‘Raw material and input cost inflation’; ‘Availability,
recruitment and retention of key colleagues’ replaces two separate risks ‘Labour availability and cost’ and ‘Recruitment and retention of key
employees’; and ‘Climate change and sustainability’ replaces ‘Sustainability’.
• Approved the alignment of ESG focus areas and ESG material issues to the Group’s principal risks and uncertainties.
• Evaluated a report from management that set out the view of the Group’s longer-term viability.
Taking the management assessment into account, the Committee agreed to recommend the Viability Statement to the Board for approval.
For further information on the Viability Statement see page 87.
TCFD The Group has voluntarily reported under the TCFD framework for 2021 ahead of the requirement to report for 2022. To assist with TCFD
reporting, management engaged specialists Willis Towers Watson to carry out a scenario-driven risk assessment to assess the Group’s
exposure to climate-related risks.
The Committee:
• Challenged management’s approach to voluntarily reporting under the TCFD framework for 2021.
• Reviewed the report prepared by Willis Towers Watson that identified the risks and opportunities in terms of transition and physical risks under
various scenarios and challenged management and the specialists on the contents of the report, including the potential impact on the business.
• Reviewed the TCFD report prepared by management, including the carbon emissions data for 2021 to ensure it was prepared and disclosed
on a consistent basis.
• Considered the impact of future carbon tax on the Group’s impairment review assumptions.
The Committee was satisfied that the TCFD report prepared by management adequately summarised the progress the Group has made
under the TCFD framework and that the impact of TCFD had been considered in the Group’s annual impairment review.
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Key areas of focus Matters considered
FRC Audit
Quality Review
The FRC is a body authorised by the Secretary of State to review and investigate the financial statements, strategic reports and directors’
reports of public and large private companies for compliance with relevant reporting requirements. The FRC is also appointed to keep
under review periodic reports produced by issuers of listed securities.
Viability and going concern thematic review: Annual Report and Financial Statements to 26 December 2020
During the year, the FRC conducted a thematic review of the viability and going concern disclosures for a sample of annual reports and
financial statements with period ends between December 2020 and March 2021, which included Bakkavor’s Annual Report and Financial
Statements for the period ended 26 December 2020.
The Committee was pleased to receive notification from the FRC in September 2021 that Bakkavor’s viability statement on page 73 of the
Annual Report and Accounts to 26 December 2020 was included in the FRC’s thematic review, highlighted as an example of better practice
in identifying the key risks to viability.
AQR Inspection Report: Audit of the Annual Report and Financial Statements to 26 December 2020
This monitoring is performed by the FRC’s Audit Quality Review (“AQR”) team, which periodically undertakes thematic inspections that
focus on particular aspects of audit across a sample of audits and firms. The AQR team will select individual audits to inspect and take
account of a number of factors, including the assessed risk in relation to the entity and particular sectors that they may wish to focus on.
The FRC provides no assurance that the Annual Report and Financial Statements are correct in all material respects; its role is not to
verify the information provided but to consider compliance with reporting requirements.
The FRC’s AQR team reviewed the audit by PwC of the Annual Report and Financial Statements for the period ended 26 December 2020,
which the AQR had selected as part of their 2020/21 annual inspection of audit firms.
The focus of the review was to identify areas where improvements were required rather than highlighting areas where work was
performed at or above the expected level. The scope of the review covered the completeness and accuracy of customer deduction
accruals, recoverability of goodwill in relation to the US cash-generating unit (“CGU”), presentation and disclosure of exceptional items,
COVID-19 (going concern), revenue recognition, inventories and journals testing. The review also covered the quality of communication
with the Committee and certain matters relating to planning, completion, ethics and quality control.
On 12 November 2021, the Committee received a copy of the findings from the FRC’s AQR team and discussed these with PwC. The
Committee confirmed that no significant areas for improvement were identified within the report. A full copy of the review was discussed
with PwC at a pre-Audit and Risk Committee meeting before discussion with the wider Committee.
External Audit Following a competitive tender carried out in 2018, PwC has been the Group’s External Auditors for three years since the appointment in
2019. The current External Audit partner is Sandeep Dhillon who has held this role since October 2021. During the year, the Committee
considered the approach, scope and risk assessments of External Audit.
The Committee:
• Met with the key members of the PwC audit team to discuss the 2021 audit plan and agree areas of focus.
• Assessed regular reports from PwC on the progress of the 2021 audit and any material issues identified, including management override of
controls and fraud in revenue recognition.
• Reviewed and debated the draft audit opinion for the 2021 year-end and was briefed by PwC on critical accounting estimates, where significant
judgement is needed.
• Approved the audit plan and the main areas of focus, including valuation of customer deduction accruals and impairment reviews for goodwill
and intangible assets.
• Reviewed and discussed with PwC its Audit and Risk Committee report on the 2021 Financial Statements which highlighted any matters arising
from the audit work undertaken by the External Auditors.
Audit and audit-related fees
The Committee:
• Reviewed and approved a recommendation from management on the Company’s audit and audit-related fees payable to the Company’s
External Auditors, PwC.
• Considered the 2021 audit fees to be in line with those expected for a listed company of this type given the complexities of the business, the
external reporting requirements and recent regulatory developments that require external auditors to exercise greater independence and
rigour in the provision of their services and in the setting of their fees.
Non-audit fees
To prevent the objectivity and independence of the External Auditors becoming compromised, the Committee has a formal policy
governing the engagement of the External Auditors to provide non-audit services. The policy is reviewed on an annual basis and this year
the Committee reviewed the Group’s policy governing non-audit work against details of regulations on the statutory audit of public-
interest entities to ensure that its policy remains in line with new regulation.
The Committee reviews and updates the Group’s policy for the provision of non-audit services to be provided by the External Auditors to
ensure that it is in line with regulatory guidance for public-interest entities. The Committee ensures that there are no exceptions to the policy.
All non-audit services to the Group provided by the External Auditors will be put to the Committee for prior consideration and approval.
The External Auditors do not provide any non-audit services to the Group other than:
• Subscription to PwC’s online technical portal (Viewpoint) which is a generic accounting subscription service. Management confirmed this
platform met their requirements.
• The half-year review of the financial statements which is required by legislation and therefore permitted. The Committee provided prior
approval for this, having noted that the External Auditors’ knowledge of the business made them the preferred choice.
Further information on the audit and non-audit fees can be found in Note 6 of the Group Financial Statements on page 173.
The Committee confirms that it has complied with the requirements of the CMA Order 2014 regarding audit tendering, auditors’
appointment, negotiation and agreement of audit fees and approval of non-audit services.
GOVERNANCE
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REPORT OF THE AUDIT AND RISK COMMITTEE
CONTINUED
Key areas of focus Matters considered
External Audit
effectiveness
Under its Terms of Reference, the Committee assesses annually the qualifications, expertise, resources and independence of the External
Auditors as well as the quality and effectiveness of the audit process.
The Committee assessed the External Auditors’ performance and effectiveness through a questionnaire completed by the Committee members
and other relevant internal parties and considered the following factors in assessing the effectiveness of the External Audit process:
• The experience and expertise of the Audit partner and the audit team;
• The internal quality-control processes in place;
• The findings from external inspections, including the FRC’s July 2021 Audit Quality Inspection report;
• The level of professional scepticism displayed throughout the audit process;
• The extent to which the audit plan was met and the quality of its delivery and execution;
• The robustness and perceptiveness of work performed on key accounting and audit judgements; and
• The content of reports on audit findings and other communications.
The assessment highlighted that PwC had provided a detailed review of the Full-Year 2020 Annual Report and Financial Statements
and best-practice approaches on disclosures as well as demonstrating strong technical knowledge. The assessment also highlighted
proposed actions for further consideration to ensure the smooth running of the Full-Year 2021 External Audit and these were reflected
in the approach to the management of the Full-Year 2021 audit.
In assessing the External Auditors’ professional scepticism, the Committee noted in the current year that PwC had robustly challenged
management’s assumptions and judgements made in carrying out the impairment review of goodwill and intangible assets and the
recognition and value of customer deduction accruals. In addition, PwC challenged management’s assumptions around downside
scenarios including the impact of ongoing COVID-19 restrictions, labour availability and further raw material inflation as part of their
work on assessing the viability of the business.
External Auditors’
independence
In assessing the independence of the External Auditors, the Committee takes into account the information and assurances provided by the External
Auditors confirming that its engagement team and its network firms involved in the audit are independent of any links with the Company.
During the year, the Committee reviewed and considered the following factors to assess the objectivity and independence of PwC:
• PwC’s procedures for maintaining and monitoring independence, including those to ensure that the partners and staff have no personal or
business relationships with the Group, other than those in the normal course of business permitted by UK ethical guidance.
• The degree of challenge to management and the level of professional scepticism shown by the Audit partner and the audit team throughout
the process.
• PwC’s policies for rotation of the Audit partner every five years, and regular rotation of key audit personnel. The current Audit partner, Sandeep
Dhillon, has held this role since October 2021.
Following consideration of the performance and independence of the External Auditors, the Committee recommended to the Group Board
that the reappointment of PwC as the Company’s External Auditors should be proposed to shareholders at the 2022 AGM.
Internal Audit The Committee oversees the performance, resourcing and effectiveness of the Internal Audit activity.
Internal Audit services have been outsourced to KPMG, who were appointed with effect from the beginning of the 2019 financial year.
Overall responsibility and direction for the Group’s Internal Audit activity is retained by the Group Head of Risk, who reports to the
Committee. The Internal Audit activity provides assurance over the effectiveness of key internal controls, as identified as part of the risk
assessment process. KPMG reports to the Group Head of Risk throughout the year and to the Committee at least four times a year.
The Committee:
• Reviewed and assessed the Internal Audit Plan for 2021 (“IA Plan”). The proposed plan represents the third year of the three-year assurance
plan that KPMG put in place on its appointment as the Company’s Internal Auditors and will be a mixture of full systems audits, in-flight reviews
and high-level limited-scope reviews, as agreed with the Committee. The IA Plan responds to certain factors across the Group’s operations
such as: i) the requirement to continue providing assurance over financial controls across the UK, US and China in support of ‘operational
excellence’; ii) maintaining a strong system of internal controls across the Group (especially given the global pandemic and its impact on the
business’s operations); and iii) coverage of information security/cyber controls and the continued importance of infrastructure, network and
data security to the Group.
• Reviewed and monitored management’s responsiveness to the findings and recommendations of the Internal Audit activity.
• Reviewed the satisfactory findings following the Internal Audit review of the Company’s approach to data protection and the UK General Data
Protection Regulation (“UK GDPR”) and associated legislation.
• Received all Internal Audit reports and, in addition, received summary reports on the results of the work of the Internal Audit activity on a
periodic basis.
• Approved the appointment of a new Internal Audit Partner, Lyn Yallop, effective from October 2021.
The Committee is actively engaged in strengthening the Internal Audit activity and extending its scope during 2022.
Internal Audit
effectiveness
The Committee has a duty to carry out an annual assessment of the effectiveness of the Internal Audit function, and as part of this assessment:
• Determine whether it is satisfied that the quality, experience and expertise of Internal Audit is appropriate for the business; and
• Review and monitor management’s responsiveness to the Internal Auditors’ findings and recommendations.
The Committee recommended that the Internal Audit function was highly effective but improvements could be made by building presence
in major governance and control forums throughout the organisation and harnessing technology and sharing best practices.
Whistleblowing The Committee considered the adequacy of the Group’s arrangements by which colleagues may, in confidence, raise concerns about
improprieties in matters of financial reporting or other matters.
There are several confidential modes for colleagues and third parties to communicate any improprieties in matters of financial reporting
or other areas.
Moreover, whistleblowing is monitored by the Group Board at each Group Board meeting. The Whistleblowing Policy is reviewed annually.
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Key areas of focus Matters considered
Anti-Bribery and
Business Ethics
Policy
The Committee considered the adequacy of the Group’s arrangements with regard to its anti-bribery and corruption and business
ethics processes.
The Committee reviewed the Anti-Bribery and Business Ethics Policy which applies across the Group.
The Committee concluded that the Anti-Bribery and Business Ethics Policy remains adequate.
In 2021, Group Legal launched an anti-bribery and corruption e-learning module for US colleagues and colleagues in China. In addition,
as part of our annual legal and governance compliance programme, UK colleagues undertook their first refresher training module on
anti-bribery and corruption.
Group IT risks The Group IT Director provides the Committee with regular updates on cyber security and during the year, the Committee received an
in-depth report on Group IT risks.
During 2021, we have agreed key security priorities and all are delivering to plan.
There had been an increase in cyber security risk over the period due to increased criminal focus on taking advantage of colleague
and corporate instability and Bakkavor continued to increase its protection against this risk through the cyber security programme.
In 2022, we will continue to invest in Bakkavor’s cyber security through our cyber security programme.
Jane Lodge
Chair, Audit and Risk Committee
7 March 2022
GOVERNANCE
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DIRECTORS’ REMUNERATION REPORT
The Remuneration Committee
recommends the Group’s policy
on Executive remuneration to
ensure this is in line with the long-term
interests of the Group.
Denis Hennequin
Chair, Remuneration Committee
REMUNERATION COMMITTEE MEMBERSHIP
The Remuneration Committee comprised three
Independent Non-executive Directors, and members
during the year were Umran Beba, Jill Caseberry and
myself as Chair. Jill Caseberry joined the Group Board
and the Remuneration Committee on 1 March 2021.
The items considered during the financial year included:
• Agreeing Executive Director base salary increases,
effective from 1 January 2021.
• Reviewing performance against the 2020 annual bonus
targets and determining the payout .
• Determining the measures and setting performance
targets for the 2021 annual bonus and LTIP awards.
• Assessing the impact of the COVID-19 pandemic on
Directors’ and Senior Executives’ remuneration
arrangements.
• Consideration of developments in market trends, good
practice, the updated investor and proxy agency guidance.
• Updates from the CPO on employment and pay conditions
across the wider workforce.
• An update from Jill Caseberry, Bakkavor’s Non-executive
Director tasked with workforce engagement and bringing
colleague views to the Group Board, on remuneration
matters raised. Due to the pandemic and in order to enable
the most effective workforce engagement session to take
place face-to-face, the meeting was postponed and took
place on 3 February 2022.
Committee meetings and membership
Member Member since
Scheduled
meetings
eligible to
attend
Scheduled
meetings
attended
Denis Hennequin
(Chair) 20 October 2017 4 4
Jill Caseberry
1
1 March 2021 2 2
Umran Beba 1 September 2020 4 4
1 Jill Caseberry was appointed to the Group Board and Remuneration Committee on
1 March 2021.
THIS REPORT IS SPLIT INTO THREE SECTIONS:
• This Annual Statement summarising the work of the
Remuneration Committee during the year and our
approach to remuneration;
• The 2021 Directors’ Remuneration Policy, which was
approved by shareholders last year and details the
framework and parameters within which Directors are
paid; and
• The Annual Report on Remuneration, which sets out the
pay and incentive outcomes for the year under review and
how the Remuneration Committee intends to implement
the Directors’ Remuneration Policy in 2022.
There will be an advisory vote at the AGM on 25 May 2022
on the Directors’ Remuneration Report, being the Annual
Statement and Annual Report on Remuneration.
As Chair of the Remuneration Committee,
I am pleased to present, on behalf of the
Group Board, the Directors’ Remuneration
Report for the year ended 25 December 2021.
MEETINGS DURING THE YEAR
The Committee held four meetings during the year
and the attendance is shown in the table below.
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95
769
22
461
26
370
12
347
11
481 31 451 85
At a glance summary
What our Executive Directors earned during 2021
The following table provides a summary of total remuneration for 2021 and the prior year. Further details on remuneration
are set out between pages 134 and 141.
Agust
Gudmundsson
Total
remuneration
1,278
£000 2021 2020
Base salary 769 577
Benefits 22 2
Bonus 461 0
LTIP – –
Pension entitlements 26 115
Total 1,278 694
Ben Waldron
Total
remuneration
740
£000 2021
Base salary 370
Benefits 12
Bonus 347
LTIP –
Pension entitlements 11
Total 740
Mike Edwards
Total
remuneration
1,048
£000 2021
Base salary 481
Benefits 31
Bonus 451
LTIP –
Pension entitlements 85
Total 1,048
2021 annual bonus
Metrics Weighting % outcome
Group Adjusted EBIT
2
75% 75%
Employee turnover 25% 0%
Total (% of max) 100% 75%
Group Adjusted EBIT
2
in 2021 was £102 million. As this was equal
to the maximum earnings target of £102 million, full bonus was
payable for performance against the financial element.
75%
bonus outcome in 2021
Ben Waldron and Mike Edwards joined the Bakkavor Group Board on 27 December 2020, the first day of the 2021 financial year.
Performance against the employee turnover
target was not met, and as such a bonus was
payable only for the financial element.
2019 LTIP awards
Mike Edwards and Ben Waldron received awards under the Long-Term Incentive Plan in April 2019 when they were Senior
Executives, prior to joining the Group Board. These were structured part as restricted shares and part as performance
shares which were subject to an earnings per share measure and relative total shareholder return performance to 25
December 2021. Neither of the conditions were met and therefore the performance shares will lapse in full in April 2022.
The restricted shares will vest in full in April 2022. Agust Gudmundsson does not participate in the LTIP scheme.
How our Executive Directors will be paid in 2022
A summary of how the Remuneration Committee intends to operate the Remuneration Policy for 2022 is as follows:
Component
Agust Gudmundsson
(£000)
Ben Waldron
(£000)
Mike Edwards
(£000)
Base salary 790 406 494
Pension (% of salary) 3% 3% 20%
¹
Annual bonus maximum (% of salary) 80% 125% 125%
LTIP award (% of salary) n/a 150% 150%
Shareholding guidelines (% of salary) 200% 200% 200%
1 As disclosed in last year’s report, Mike Edwards’ pension contribution will reduce to the workforce contribution rate of 3% by the end of the 2023 financial year.
2 Group adjusted EBIT is also referred to as ‘Adjusted operating profit’. Alternative Performance Measures (“APMs”), including ‘like-for-like’, ‘adjusted’ and ‘underlying’, are applied
consistently throughout the 2021 Annual Report and Accounts. The APMs are defined in full and reconciled to the reported statutory measure in Note 36 of the Notes to the
Consolidated Financial Statements.
GOVERNANCE
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DIRECTORS’ REMUNERATION REPORT
CONTINUED
OUR BUSINESS PERFORMANCE IN 2021
Whilst we have faced unprecedented industry-wide
challenges, the Group has delivered a robust performance.
This has been underpinned by the resilience of the Group’s
business model, combined with our customer and supplier
relationships, category expertise and strengthened financial
position. We have been able to respond with agility and
effectively manage the disruption to the supply chain and
tightening labour market, and the consequential inflationary
pressure across our cost base.
We are incredibly grateful for, and admire, the continued
commitment and outstanding performance of our colleagues
in what has been a challenging period. We have sought to
make Bakkavor an even better place to work for our existing
colleagues and to support the recruitment of new talent to
help mitigate the high numbers of vacancies and enhance
retention. We have implemented an out-of-cycle pay increase
for the majority of our factory-based colleagues, provided
additional and enhanced benefits such as free transport and
referral bonuses, upgraded site facilities and invested in
developing our talent for the future with the launch of two
training programmes.
We have been strongly encouraged by the return in demand
for our categories in the UK as COVID-19 government
restrictions eased through the year, and volumes have
recovered strongly. In the second half of the year, industry-
wide disruption across the supply chain and in labour
availability have provided a difficult backdrop in which to
operate, but our scale, category expertise and strong financial
position have enabled us to continue to deliver our core
products and a strong pipeline of innovation for our
customers. This pace of post-pandemic recovery, coupled
with the impact of Brexit-related changes, has resulted in
significant inflationary pressure across the cost base in the
second half of the year and we successfully secured price
increases across our customer base to mitigate the impact.
In the US, sales growth has accelerated as strong demand
for our fresh products remains and we have successfully
launched a range of ready meals nationally with a strategic
customer. Operationally we remain focused on supporting our
growth, with investment in attracting new talent and retaining
existing colleagues, as well as capital investment to increase
capacity. In China, the post-pandemic recovery has been
slower with local lockdowns continuing to impact sales,
however our strategic focus on entering new channels
is being realised, with strong sales growth with grocery
retail and office catering customers.
Across the Group we have continued to drive operational
efficiency improvements, bolstering our operational excellence
team, increasing our spend on payback projects to drive change
programmes and in the UK, continuing to roll out a new
automated smart manufacturing system, as well as
completing an assessment of automation opportunities.
Overall, the Group delivered robust financial progress in
the year, despite the challenging backdrop. Group reported
revenue increased 4.4% year-on-year to £1,871.6 million and
adjusted operating profit was £102.0 million at a margin of
5.4%, up 70 basis points. The Group also reduced net debt and
brought leverage within the medium-term target range, at
1.9 times, and continues to operate with significant liquidity
headroom. Our strengthened financial position supported the
decision to propose a final dividend for 2021, which combined
with our interim dividend results in a total 2021 dividend of
6.60 pence per Ordinary share.
REMUNERATION OUTCOMES FOR 2021
Variable pay
The annual bonus plan for 2021 was based 75% on Group
Adjusted EBIT (also referred to as adjusted operating profit)
and 25% on colleague engagement measured through
employee turnover. The profit targets were set at the
beginning of 2021 shortly after the UK entered its third
lockdown with restrictions not easing until late March.
The targets were deemed to be very stretching in the
circumstances and had anticipated a recovery from the
pandemic during the course of the 2021 financial year. As
mentioned earlier, the disruption from the pandemic lessened
through the year and sales recovered strongly. The Group
delivered adjusted EBIT of £102 million which was equal to the
maximum target and therefore, on a formulaic basis, this part
of the annual bonus scheme was achieved in full. In contrast,
colleague retention became increasingly challenging, largely
because of the effects of Brexit and the associated supply of
labour, and this resulted in the employee turnover threshold
not being met and 25% of the bonus not being earned.
The Remuneration Committee considered carefully the
formulaic outcomes for 2021 and whether any adjustment or
use of negative discretion was required to reflect the overall
performance of the business and the impact on broader
stakeholders. The Committee felt that a bonus outcome of
75% of maximum was appropriate in the circumstances as it
fairly reflects the strong performance of the business during
2021 and after taking into account the following factors:
• No state aid had been taken during 2021;
• An interim dividend was declared and paid following no
full-year dividend for 2020;
• The increased investment in colleagues through additional
benefits, better facilities and training and an out-of-cycle pay
increase; and
• The low levels of bonus in the last three years (nil, 12.4%
of maximum and nil).
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Mike Edwards and Ben Waldron were granted restricted share
awards in April 2019, prior to their joining the Group Board,
alongside performance share awards. Their restricted share
awards will vest in April 2022. Ben Waldron was on an
international assignment as CEO of Bakkavor US when his
2019 LTIP award was granted. The performance share awards
were based on the achievement of earnings per share (“EPS”)
and relative total shareholder return (“TSR”) measures, tested
to 25 December 2021. For EPS, the minimum threshold for
payment was 16.5 pence and the performance was 10.4 pence,
therefore no payment was due. For TSR, Bakkavor ranked in
the lower quartile and therefore no payment was due for this
measure either. As Group Board Directors, Mike Edwards and
Ben Waldron are bound by the Directors’ Remuneration Policy
and therefore will no longer receive further grants of
restricted shares.
CFO’S ADDITIONAL RESPONSIBILITIES
Ben Waldron joined the Board in December 2020 and his base
salary (£370,000) was set significantly below his predecessor’s
salary (£478,675), to reflect his first Board appointment and
we stated in last year’s report the intention to review and
potentially increase his salary as he gains more experience
and subject to his contribution and performance.
The Board believes Ben has exceeded expectations during
an incredibly challenging period. Furthermore, Ben’s scope
as CFO is broader than his predecessor’s and that of similar
roles as it includes global accountability for Group Strategy
and Information Technology alongside responsibilities
covering Finance, Group Legal and Company Secretariat,
Risk, Tax and Investor Relations. Reflecting his exceptional
performance over 2021, his importance to the Group and his
breadth of responsibility, the Remuneration Committee has
decided to increase Ben’s salary by 9.7% to £406,000. The
Remuneration Committee is acutely aware of the constraints
on executive pay and workforce comparisons and, in this case,
believes a one-off award is warranted. Benchmarking was
used as a secondary reference point and the Committee takes
comfort that Ben’s salary and total remuneration is not out of
line with comparable sector peers.
APPLICATION OF REMUNERATION POLICY FOR 2022
The Remuneration Committee intends to operate the
Remuneration Policy for Executive Directors for 2022
as follows:
• Base salaries for the CEO and COO, UK were increased from
1 January 2022 by 2.75% in line with the general salaried
workforce increase. As referred to earlier, the Remuneration
Committee agreed to an increase of 9.7% for the CFO.
• Annual bonus opportunities will be 80% of salary for the CEO
and 125% of salary for the CFO and COO, UK. The annual bonus
measures will be the same as last year with 75% based on
Group Adjusted EBIT and 25% on colleague engagement
measured through employee turnover. The same bonus criteria
cascade down to the broader workforce in the UK, covering
c.1,400 colleagues with regional profit performance assessed
where relevant in the US and China. Over the course of 2022,
the Remuneration Committee will review the Group’s ESG
strategy and consider what related measures or objectives
might be introduced in the 2023 suite of metrics.
• It is expected that LTIP awards will be granted in 2022 at 150%
of salary to the CFO and COO, UK (the CEO does not participate
in the LTIP). As in previous years, half the award will be based
on relative TSR performance and half on EPS targets.
SHAREHOLDER FEEDBACK
The Remuneration Committee was pleased to note the very
high levels of shareholder support for the 2021 Directors’
Remuneration Policy and for our Remuneration Report at last
year’s Annual General Meeting. We hope you will be supportive
of the advisory vote on remuneration at the 2022 AGM.
Denis Hennequin
Chair, Remuneration Committee
7 March 2022
GOVERNANCE
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DIRECTORS’ REMUNERATION REPORT
CONTINUED
DIRECTORS’ REMUNERATION POLICY
This part of the Directors’ Remuneration Report
sets out the Directors’ Remuneration Policy
(“the Policy”) for the Group and has been prepared
in accordance with Schedule 8: The Large and
Medium-sized Companies and Groups (Accounts
and Reports) Regulations 2008 (as amended) and
the UK Listing Authority’s Listing Rules. This Policy
was put to a binding shareholder vote at the 20 May
2021 AGM and is effective for three years from
approval. A full copy of the Directors’ Remuneration
Policy was set out in the 2020 Annual Report and
Accounts and can be found in the ‘Investors’ section
of the Company’s website, www.bakkavor.com.
No changes have been made to the Policy.
KEY CONSIDERATIONS IN DETERMINING THE
REMUNERATION POLICY
The Remuneration Committee designed the Policy with the
following aims in mind. The Policy should:
• Attract, retain and motivate high-calibre Senior Executives
and focus them on the delivery of the Group’s strategic and
business objectives.
• Be competitive against appropriate market benchmarks
with the scope to earn above-market rewards for strong
performance.
• Be simple and understandable, both internally and externally.
• Achieve the appropriate consistency of approach across the
Senior Management population.
• Take due account of good governance and promote the long-
term success of the Group.
In seeking to achieve the above objectives, the Remuneration
Committee is mindful of the views of a broad range of
stakeholders in the business and accordingly takes account
of several factors when setting remuneration. This includes
market conditions, pay and benefits in relevant comparator
organisations, terms and conditions of employment across
the Group, the Group’s risk appetite, the expectations of
institutional shareholders and feedback from shareholders
and other stakeholders.
The Policy has considered the principles of the 2018 UK
Corporate Governance Code and the voting guidelines of
major UK institutional investor bodies. Under the Code, the
Remuneration Committee is asked to address six factors
in determining the Policy:
1. Clarity – the Policy is well understood by our Directors
and Management Board and has been clearly articulated
to shareholders and proxy voting agencies.
2. Simplicity – the Remuneration Committee believes the
current market standard remuneration structure is simple
and well understood. We have purposefully avoided any
complex structures which have the potential to deliver
unintended outcomes.
3. Risk – our Policy and approach to target setting seek to
discourage any inappropriate risk-taking. Measures may be
a blend of share price, financial and non-financial objectives
and the targets are appropriately stretching to help ensure
that the risk of inappropriate actions being taken is mitigated.
Enhanced malus and clawback provisions will apply.
4. Predictability – Executives’ incentive arrangements are
subject to individual participation caps. An indication of
the range of values in packages is provided in the reward
scenario charts included in the Policy report. Deferred
bonus and LTIP awards provide alignment with the share
price and their values will depend on share price at the
time of vesting.
5. Proportionality – there is a clear link between individual
awards, delivery of strategy and our long-term performance.
6. Alignment to culture – pay and policies cascade down the
organisation and are fully aligned to Bakkavor’s culture.
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REMUNERATION POLICY TABLE
The table below sets out, for each element of pay, a summary of how remuneration is structured and how it supports the
Company’s strategy.
Executive Directors
Purpose and link to strategy Operation Maximum opportunity Performance metrics
Base salary
To recruit and retain
Executives of the highest
calibre who are capable
of delivering the Group’s
strategic objectives,
reflecting each individual’s
experience and role within
the Group.
Base salary is designed to
provide an appropriate level
of fixed income to avoid an
over-reliance on variable
pay elements that could
encourage excessive
risk-taking.
Salaries are normally reviewed
annually, and changes are generally
effective from the start of the
financial year.
The annual salary review of
Executive Directors takes a range of
factors into consideration, including:
• Business performance.
• Salary increases awarded to the
overall colleague population.
• Skills and experience of the
individual over time.
• Scope of the individual’s
responsibilities.
• Changes in the size and complexity
of the Group.
• Market competitiveness assessed
by periodic benchmarking.
• The underlying rate of inflation.
Whilst there is no prescribed
formulaic maximum, any increases
will take into account prevailing
market and economic conditions
and the approach to colleague pay
throughout the organisation.
Base salary increases are
awarded at the discretion of the
Remuneration Committee; however,
salary increases will normally be no
greater than the general increase
awarded to the wider workforce,
in percentage of salary terms.
Percentage increases beyond
those granted to the wider workforce
may be awarded in certain
circumstances, such as when there
is a change in the individual’s role
or responsibility or where there has
been a fundamental change in the
scale or nature of the Company.
In addition, a higher increase may
be made where an individual had
been appointed to a new role at
below-market salary while
gaining experience. Subsequent
demonstration of strong
performance may result in a
salary increase that is higher
than for the wider workforce.
Executive Directors’ performance
is a factor considered when
determining salaries.
No recovery or withholding
provisions apply.
Benefits
Benefits in kind offered to
Executive Directors are
provided to assist with
retention and recruitment.
The Company aims to offer benefits
that are in line with typical market
practice.
The main benefits currently
provided include:
• Family private medical insurance.
• Life assurance.
• Income protection.
• Health screening.
• Company car/car allowance.
• Travel insurance.
Under certain circumstances, the
Group may offer relocation allowances
or assistance. Expatriate benefits
may be offered where required.
Travel and any reasonable
business-related expenses
(including tax thereon) may be
reimbursed on a gross-of-tax basis.
Executive Directors may become
eligible for other benefits which
are introduced for the wider
workforce on broadly similar terms.
The value of each benefit is not
predetermined and is typically
based upon the cost to the Group.
Not performance-related.
No recovery or withholding provisions
apply other than for any relocation
costs that may be provided.
A proportion of any relocation costs
may be recovered where a Director
leaves the employment of the Group
within a specified time period after
appointment or date of relocation.
GOVERNANCE
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DIRECTORS’ REMUNERATION REPORT
CONTINUED
Purpose and link to strategy Operation Maximum opportunity Performance metrics
Pensions
The Group aims to provide
a contribution towards life
in retirement.
Directors are eligible to receive
employer contributions to the
Company’s pension plan (which
is a defined contribution plan) or a
salary supplement in lieu of pension
benefits, or a mixture of both.
The CEO’s contribution rate from
1 February 2021 and the CFO’s rate
is in line with the workforce rate,
currently 3% of salary.
The current COO’s UK pension
contribution rate will continue at the
level in place prior to his joining the
Group Board – 20% of salary – and
this will reduce to the workforce
rate (currently, 3% of salary) from
1 January 2024.
Any future Executive Director
appointments will receive pension
contributions aligned with the
workforce contribution rate in
place at the time.
Not performance-related.
No recovery or withholding
provisions apply.
Short-Term Incentive Plan “STIP” or annual bonus
The annual bonus scheme
rewards the achievement
of stretching objectives
that support the Group’s
corporate goals and delivery
of the business strategy.
Delivery of a proportion
in deferred bonus shares
provides a retention
element and alignment
with shareholders.
Bonuses are determined based
on measures and targets that
are agreed by the Remuneration
Committee. Bonus is based on
performance over the relevant
financial year.
Two-thirds of the annual bonus
will be payable in cash, typically
in March following the end of the
financial year.
Up to one-third of the bonus is
compulsorily deferred in shares
(or cash in the case of the current
CEO) for three years under the
Deferred Annual Bonus Plan.
At the discretion of the
Remuneration Committee,
participants may also be entitled to
receive the value of dividends paid
between grant and vesting on vested
shares. The payment may assume
dividend reinvestment.
The maximum annual bonus
opportunity is 150% of salary
for Executive Directors.
The current CEO’s bonus opportunity
is lower, at 80% of his base salary.
The normal maximum for the CFO
and COO, UK is 125% of salary,
although this may be increased
in line with the maximum 150%
of salary limit.
Performance measures are
determined by the Remuneration
Committee each year and may vary
to ensure that they promote the
Company’s long-term business
strategy and shareholder value.
The majority of the annual bonus
outcome will be based on financial
measures. This may be a single
measure, such as profit, or a mix
of measures as determined by the
Remuneration Committee. Personal
objectives and/or strategic KPIs may
also be chosen.
Where a sliding scale of targets
applies to financial measures, up to
20% of that element may be payable
for threshold performance.
The bonus measures are reviewed
annually, and the Remuneration
Committee has the discretion to vary
the mix of measures or to introduce
new measures taking into account
the strategic focus of the Company
at the time.
The Remuneration Committee may
alter the bonus outcome if it considers
that the payout is inconsistent with
the Company’s overall performance,
taking account of any factors it
considers relevant. This will help to
ensure that the payout reflects overall
Company performance during the
period. The Remuneration Committee
will consult with leading investors
if appropriate before any exercise
of its discretion to increase the
bonus outcome.
Bonus payments, including deferred
bonus awards, are subject to recovery
and withholding provisions (see
‘Recovery and withholding’ in the ‘Notes
to the policy table’ for further detail).
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Purpose and link to strategy Operation Maximum opportunity Performance metrics
Long-Term Incentive Plan (“LTIP”)
The LTIP is designed to
incentivise the successful
execution of business
strategy over the longer
term and provide long-
term retention.
It facilitates share ownership
to provide further alignment
with shareholders.
Awards will typically be granted
annually to Executive Directors
in the form of nil or nominal cost
options that vest according to
performance conditions normally
measured over three financial years.
The Remuneration Committee will
consider the prevailing share price
when deciding on the number of
shares to be awarded as part of any
LTIP grant.
Awards are subject to an additional
post-vesting holding period, which
requires awards to be retained for a
period of two years from the end of
the vesting period, except for shares
sold to pay personal tax upon vesting
or exercise.
At the discretion of the Remuneration
Committee, participants may also
be entitled to receive the value of
dividends paid between grant and
vesting (or, if applicable, between
grant and the earlier to occur of the
expiry of any holding period and the
exercise of an award) on vested
shares. The payment may be in cash
or shares and may assume dividend
reinvestment.
The current CEO will not participate
in the LTIP.
The individual plan limit is 200% of
base salary in any financial year.
The award policy for the CFO and
COO, UK is set at 150% of base
salary, although the Remuneration
Committee has the discretion to
make an award of up to 200% of
base salary.
Performance is normally measured
over no less than three financial years.
Awards will be subject to the
achievement of stretching targets
designed to incentivise performance
in support of the Group’s strategy and
business objectives.
LTIP awards may be subject to relative
TSR and earnings per share growth
targets. However, the Remuneration
Committee has the flexibility to vary
the mix of measures or to introduce
new measures for future awards,
taking into account business priorities
at the time of grant.
For TSR and financial measures, no
more than 25% of each element may
vest for threshold performance.
The Remuneration Committee
may alter the vesting outcome if it
considers that the level of vesting is
inconsistent with the Company’s
overall performance, taking account
of any factors it considers relevant.
This will help to ensure that vesting
reflects overall Company
performance during the period.
Awards are subject to recovery and
withholding provisions (see ‘Recovery
and withholding’ in the Notes to the
policy table for further detail).
All-colleague share schemes
Encourage colleague share
ownership and therefore
increase alignment with
shareholders.
The Company may, from time to
time, operate tax-approved share
plans (such as the HMRC-approved
Save As You Earn Option Plan and
Share Incentive Plan) for which
Executive Directors could be eligible.
The schemes are subject to the
limits set by HMRC from time
to time.
Not performance-related.
No recovery or withholding
provisions apply.
Share ownership guidelines
Encourage Executive
Directors to build a
meaningful shareholding in
the Group so as to further
align their interests with
those of shareholders.
Executive Directors are required to
retain at least half of any share
awards vesting as shares (after the
sale of any shares to settle tax due)
until they have reached the required
level of holding.
Shares owned outright by the
Executive Director or a connected
person are included. Shares or
share options which are subject
to a performance condition are not
included. Unvested deferred bonus
shares and vested LTIP awards
which remain unexercised may
count towards the in-employment
guideline on a net of tax basis.
During employment: Executive
Directors are required to build and
retain a shareholding in Bakkavor
equivalent to at least 200% of their
base salary.
Post-employment: Executive
Directors are normally required to
hold shares at a level equal to the
lower of their shareholding at
cessation and 200% of salary for
two years post cessation (excluding
shares purchased with own funds
and any shares from share plan
awards granted before the approval
of this policy).
Not performance-related.
GOVERNANCE
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DIRECTORS’ REMUNERATION REPORT
CONTINUED
Purpose and link to strategy Operation Maximum opportunity Performance metrics
Chairman and Non-executive Directors’ fees
To attract Non-executive
Directors who have a
broad range of
experience and skills.
To provide the Group with
access to independent
judgement on issues of
strategy, performance,
resources and standards
of conduct.
Non-executive Directors may
receive fees paid monthly in cash,
which consist of an annual basic fee.
They may also receive additional
fees for additional responsibilities.
The Chairman’s fee is reviewed
annually by the Remuneration
Committee (without the
Chairman present).
Fee levels for the Non-executive
Directors are determined by the
Chairman and Executive Directors.
In exceptional circumstances if
there is a temporary, yet material,
increase in the time commitments
for Non-executive Directors, the
Group Board may pay extra fees to
recognise that additional workload.
Non-executives ordinarily do not
participate in any pension, bonus
or share incentive plans. Travel,
accommodation and other business-
related expenses incurred in carrying
out a Non-executive role will be
paid by the Company including,
if relevant, any ‘gross-up’ for tax.
As was disclosed in the prospectus
prepared on Admission and in the
Policy approved by shareholders
in 2018, Lydur Gudmundsson is
currently employed to provide
consulting services to the Group for
an annual fee. He receives medical
cover for the benefit of his family in
the UK.
When reviewing fee levels, account
is taken of market movements
in the fees of Non-executive
Directors, Group Board Committee
responsibilities and ongoing
time commitments.
Actual fee levels are disclosed in
the Annual Report on Remuneration
for the relevant financial year.
Not performance-related.
No recovery or withholding
provisions apply.
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Notes to the policy table
RECOVERY AND WITHHOLDING
Awards under the Annual Bonus Plan, the Deferred Annual
Bonus Plan and the Long-Term Incentive Plan are subject
to recovery and withholding provisions which permit the
Remuneration Committee, at its discretion, to reduce the size of
any future bonus or share award granted to the colleague, to
reduce the size of any granted but unvested share award held
by the colleague, or to require the colleague to make a cash
payment to the Company. The circumstances in which the
Company may apply the recovery and withholding provisions
are the discovery of a material misstatement of financial
results, a miscalculation or error in assessing any condition
(including any performance condition) applying to the award, in
the event of serious misconduct committed by the colleague,
where there has been corporate failure or reputational damage.
In respect of cash bonus payments under the Annual Bonus
Plan, the recovery and withholding provisions apply for one
year from the date of payment of the bonus (or, if later, the date
of publication of the Company’s financial results for the year
following the relevant year over which the bonus was earned).
In respect of share awards under the Deferred Annual Bonus Plan
and the Long-Term Incentive Plan, the recovery and withholding
provisions apply up until the third anniversary of the date on
which the relevant award vests, although the Remuneration
Committee may extend this period for a further two years if there
is an ongoing investigation into the circumstances of any event that,
if determined to have occurred, would permit the Remuneration
Committee to operate the recovery and withholding provisions.
PERFORMANCE CONDITIONS
The choice of performance metrics applicable to the annual
bonus scheme reflect the Remuneration Committee’s belief that
any incentive compensation should be appropriately challenging
and tied to both the delivery of key financial targets and individual
and/or strategic performance measures intended to ensure that
Executive Directors are incentivised to deliver across a range of
objectives for which they are accountable. The Remuneration
Committee has retained some flexibility on the specific measures
which will be used to ensure that any measures are fully aligned
with the strategic imperatives prevailing at the time they are set.
The measures and their weightings for the bonus scheme for
the forthcoming year will be set out on a prospective basis,
subject to limitations with regard to commercial sensitivity.
The full details of the targets will be disclosed in the Directors’
Remuneration Report when they are in the public domain,
usually following the end of the relevant financial year.
The choice of the performance conditions applicable to the
LTIP awards will be aligned with the Company’s objective of
delivering superior levels of long-term value to shareholders.
The Remuneration Committee has retained flexibility on the
measures which will be used for future award cycles to
ensure that the measures are fully aligned with the strategy
prevailing at the time the awards are granted.
The Remuneration Committee will review the calibration of
targets applicable to the annual bonus and the LTIP annually to
ensure they remain appropriate and sufficiently challenging,
taking the Company’s strategic objectives and the interests
of shareholders into account.
DIFFERENCES IN REMUNERATION POLICY BETWEEN EXECUTIVE
DIRECTORS AND OTHER COLLEAGUES
The overall approach to reward for colleagues across the
workforce is a key reference point when setting the
remuneration of the Executive Directors. When reviewing
the salaries of the Executive Directors, the Remuneration
Committee pays close attention to pay and employment
conditions across the wider workforce and in normal
circumstances, the increase for Executive Directors will be no
higher than the average increase for the general workforce.
The key difference between the remuneration of Executive
Directors and that of our other colleagues is that, overall, at
senior levels, remuneration is increasingly long term and ‘at
risk’, with an emphasis on performance-related pay linked to
business performance, and share-based remuneration. This
ensures that remuneration at senior levels will increase or
decrease in line with business performance and provides
alignment between the interests of Executive Directors and
shareholders. In particular, long-term incentives are provided
only to the most senior Executives, as they are reserved for
those considered to have the greatest potential to influence
overall levels of performance.
REMUNERATION COMMITTEE DISCRETION IN OPERATION OF
VARIABLE PAY SCHEMES
The Remuneration Committee operates under the powers
it has been delegated by the Group Board. In addition, it
complies with rules that are either subject to shareholder
approval (Long-Term Incentive Plan and Deferred Share
Bonus Plan) or to approval by the Group Board (annual
performance bonus scheme). These rules provide the
Remuneration Committee with certain discretions which serve
to ensure that the implementation of the Remuneration Policy
is fair, both to the individual Director and to shareholders.
The Remuneration Committee also has discretion to set
components of remuneration within a range, from time to
time. The extent of such discretion is set out in the relevant
rules, the maximum opportunity, or the performance
metrics section of the Policy table above. To ensure the
efficient administration of the variable incentive plans
outlined above, the Remuneration Committee will apply
certain operational discretions.
These include the following:
• Selecting the participants in the plans on an annual basis.
• Determining the timing of grants of awards and/or payments.
• Determining the quantum of awards and/or payments (within
the limits set out in the Directors’ Remuneration Policy table).
• Determining the choice and adjustment of performance
measures and targets for each incentive plan in accordance
with the Policy set out above and the rules of each plan.
• Determining the extent of vesting based on the assessment
of performance, and judgement relating to measurement of
performance in certain circumstances such as a change of
control or reconstruction.
• Whether recovery and withholding shall be applied to any award
in the relevant circumstances and, if so, the extent to which it
shall be applied.
• Making appropriate adjustments as required in certain
circumstances, for instance changes in capital structure.
GOVERNANCE
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DIRECTORS’ REMUNERATION REPORT
CONTINUED
• Determining ‘good leaver’ status for incentive plan purposes
and applying the appropriate treatment.
• Undertaking the annual review of weighting of performance
measures and setting targets for the Annual Bonus Plan and
other incentive schemes, where applicable, from year to year.
If an event occurs which results in the Annual Bonus Plan or
LTIP performance conditions and/or targets being deemed
no longer appropriate (e.g. material acquisition or divestment),
the Remuneration Committee will have the ability to adjust
appropriately the measures and/or targets and alter
weightings, provided that the revised conditions are not
materially less challenging than the original conditions.
Any use of the above discretion would, where relevant, be
explained in the Annual Report on Remuneration and may,
as appropriate, be the subject of consultation with the
Company’s major shareholders.
LEGACY ARRANGEMENTS
For the avoidance of doubt, the Remuneration Committee may
approve payments to satisfy commitments agreed prior to the
approval of this Policy, including to the listing of the Company
in November 2017 that have either been disclosed to
shareholders in the prospectus or formed part of the pre-IPO
Remuneration Policy. The Remuneration Committee may also
approve payments outside this Remuneration Policy in order
to satisfy legacy arrangements made to a colleague prior to
(and not in contemplation of) promotion to the Group Board.
This includes restricted share awards (being share awards
without any performance criteria) which were granted to
below Group Board colleagues who have subsequently
been appointed to the Group Board. All historic awards that
were granted prior to the approval of this Policy, including
in connection with or prior to listing, but which remain
outstanding, remain eligible to vest based on their original
award terms.
REMUNERATION SCENARIOS FOR EXECUTIVE DIRECTORS
The charts below show an estimate of the 2022 remuneration package for each Executive Director under four assumed
performance scenarios. These scenarios are based upon the Remuneration Policy set out above.
0
500
1000
1500
2000
2500
Minimum On-target
Long-term incentiveAnnual bonusFixed Share price growth
CEO
£000s
UK COOCFO
Maximum Max with
growth
Minimum On-target Maximum Max with
growth
Minimum On-target Maximum Max with
growth
100%
£836
73%
£1,152
57%
£1,467
57%
27%
43% 43%
£1,467
100%
£441
52%
30%
18%
£847
28%
£1,557
24%
39% 33%
16%
33% 27%
£1,862
100%
£624
56%
28%
17%
£1,119
31%
£1,984
27%
37%
31%
16%
31% 26%
£2,354
The scenarios used in the graphs above are defined as follows:
Minimum Target Maximum Maximum with share price growth
Base salary As at 1 January 2022
Benefits Estimated value for 2022
Pension CEO and CFO: 3% of salary;
and UK COO: 20% of salary
Bonus 0% of maximum 50% of maximum 100% of maximum
CEO: 80% of salary
CFO and UK COO: 125%
of salary
As per maximum
LTIP (CFO & UK COO only) 0% of maximum 25% of maximum 100% of maximum
CFO & UK COO: 150%
of salary
As per maximum but in addition a
50% share price increase over three
years is assumed
OTHER REMUNERATION POLICIES
Remuneration for new appointments
Where it is necessary to appoint or replace an Executive Director, the Remuneration Committee’s approach when considering the
overall remuneration arrangements in the recruitment of a new Executive Director is to take account of the calibre, expertise and
responsibilities of the individual, his or her remuneration package in their prior role, and market rates. Remuneration will be in
line with our Policy and the Remuneration Committee will not pay more than is necessary to facilitate recruitment.
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The remuneration package for a new Executive Director will be set in accordance with the terms of the Company’s approved
Remuneration Policy in force at the time of appointment. Further details are provided below:
Salary The Remuneration Committee will set a base salary appropriate to the calibre, experience and responsibilities of
the new appointee. In arriving at a salary, the Remuneration Committee may take into account, amongst other
things, the market rate for the role, internal relativities and his or her salary level prior to joining the Group Board.
The Remuneration Committee has the flexibility to set the salary of a new Executive Director at a lower level
initially, with a series of planned increases implemented over the following few years to bring the salary to the
desired positioning, subject to individual performance.
In exceptional circumstances, the Remuneration Committee has the ability to set the salary of a new Executive
Director at a rate higher than the market level to reflect the criticality of the role and the experience and
performance of the individual.
Benefits Benefits will be consistent with the principles of the Policy set out on page 125. The Company may award certain
additional benefits and other allowances including, but not limited to, those to assist with relocation support,
temporary living and transportation expenses, educational costs for children and tax equalisation to allow
flexibility in employing an overseas national.
Pension benefits A maximum pension contribution in line with the workforce contribution level (currently 3% of salary) may be
payable for external appointments or any internal promotions appointed following the approval of this Policy.
Annual bonus The maximum bonus opportunity is 150% of base salary.
Long-Term Incentive Plan The maximum opportunity is 200% of base salary. This may be used on recruitment and on an ongoing basis,
if appropriate.
Replacement awards In addition to the above, the Remuneration Committee may offer additional cash and/or share-based elements in
order to ‘buyout’ remuneration relinquished on leaving a former employer.
In the event that such a buyout is necessary to secure the services of an Executive Director, the structure of any
award or payment will mirror, as far as is possible, the arrangements in place at the incoming Executive Director’s
previous employer.
Any share awards made in this regard may have no performance conditions, or different performance conditions,
or a shorter vesting period compared with the Company’s existing plans, as appropriate.
Shareholders will be informed of any buyout arrangements at the time of the Executive Director’s appointment.
Notice periods Notice periods shall be up to 12 months.
Depending on the timing and responsibilities of the appointment, it may be necessary to set different annual bonus/LTIP
performance measures and targets from those applicable to other Executive Directors.
Any incentive awards granted to colleagues prior to their promotion to the Group Board will be permitted to vest on their original terms.
The terms of appointment for a Non-executive Director would be in accordance with the Remuneration Policy for Non-executive
Directors as set out in the Policy table.
TERMINATION AND LOSSOFOFFICE PAYMENTS
The Group’s policy on remuneration for Executive Directors who leave the Group is consistent with general market practice.
The Remuneration Committee will exercise its discretion when determining amounts that should be paid to leavers, taking into
account the facts and circumstances of each case.
It is the Company’s policy that the period of notice for Executive Directors will not normally exceed 12 months and, accordingly,
the employment contracts of the Executive Directors are terminable on 12 months’ notice by either party. In the event of an
Executive Director’s departure, a payment in lieu of notice may be payable. The Company may pay the value of the Executive
Director’s base salary together with accrued holiday entitlement.
The Company is unequivocally against rewards for failure; the circumstances of any departure, including the individual’s
performance, would be taken into account in every case. Statutory redundancy payments may be made, as appropriate. Service
agreements may be terminated without notice and without payment in lieu of notice in certain circumstances, such as gross
misconduct. The Company may require the Executive Director to work during their notice period or may choose to place the
individual on garden leave; for example, to ensure the protection of the Company’s and shareholders’ interests where the
Executive Director has access to commercially sensitive information. The Remuneration Committee may agree payments it
considers reasonable in settlement of legal claims. This may include an entitlement to compensation in respect of leavers’
statutory rights under employment protection legislation in the UK or in other jurisdictions.
Except in the case of gross misconduct or resignation, the Company may at its absolute discretion reimburse for reasonable
professional fees relating to the termination of employment and, where an Executive Director has been required to relocate,
to pay reasonable repatriation costs, including possible tax exposure costs.
GOVERNANCE
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DIRECTORS’ REMUNERATION REPORT
CONTINUED
Ordinarily, Executive Directors have no entitlement to a bonus payment in the event they cease to be employed by the Group
or are under notice of termination of employment at the date that their bonus would otherwise be paid. However, they may be
considered for a bonus payment by the Remuneration Committee in ‘good leaver’ circumstances (i.e., death, injury, disability,
retirement, their employing company or the business for which they work being sold out of the Group or in other circumstances
at the discretion of the Remuneration Committee). Any such bonus payment would ordinarily be subject to a pro-rata reduction
based on the period worked in the relevant year, and there would be no requirement for any portion of such bonus payment to
be deferred into an award over shares under the Deferred Annual Bonus Plan.
In the event of an Executive Director’s departure, any outstanding share awards will be treated in accordance with the plan
rules as follows:
Deferred Annual Bonus
Plan (“DABP”)
As a general rule, a DABP award will lapse upon a participant ceasing to hold employment or ceasing to be a Director
within the Group (where relevant).
In the event of a participant’s death, injury, disability, retirement, their employing company or the business for which
they work being sold out of the Group or in other circumstances at the discretion of the Remuneration Committee,
awards will not be forfeited but will instead normally vest in full on the original vesting date (or on the date of cessation
if the Remuneration Committee so determines) to such extent (which may include the full extent of the award) as the
Remuneration Committee determines appropriate.
In exceptional circumstances, the Remuneration Committee may allow the awards to vest on cessation of the
participant’s employment.
Long-Term
Incentive Plan
As a general rule, an LTIP award will lapse upon a participant ceasing to hold employment or ceasing to be a Director
within the Group (where relevant).
However, if the participant ceases to be a colleague or a Director within the Group because of their death, injury,
disability, retirement, their employing company or the business for which they work being sold out of the Group or in
other circumstances at the discretion of the Remuneration Committee, then their award will vest on the date when it
would have vested if they had not so ceased.
The extent to which an award will vest in these situations will depend upon two factors:
• The extent to which the performance conditions (if any) have been satisfied at that time.
• The pro-rating of the award by reference to the period of time served in employment during the normal vesting period,
although the Remuneration Committee can decide to reduce or eliminate the pro-rating of an award if it regards it as
appropriate to do so in the particular circumstances.
Alternatively, if a participant ceases to be a colleague or Director in the Group for one of the ‘good leaver’ reasons
specified above (or in other circumstances at the discretion of the Remuneration Committee), the Remuneration
Committee can decide that their award will vest on cessation, subject to:
• The performance conditions measured at that time.
• Pro-rating by reference to the time of cessation as described above.
Such treatment shall also apply in the case of death.
EXECUTIVE DIRECTORS’ SERVICE CONTRACTS
The Company does not have agreements with any Director that would provide compensation for loss of office or employment
resulting from a takeover except that provisions of the Company’s share schemes and plans may cause options and awards
granted to colleagues under such schemes and plans to vest on a takeover. In accordance with long-established policy,
all Executive Directors have rolling service agreements which may be terminated in accordance with the terms of these
agreements. Directors’ service agreements are kept for inspection by shareholders at the Company’s registered office.
Name Date of joining Bakkavor Date of service contract Notice period
Agust Gudmundsson 1 August 1986 (founder) 18 December 2011, as amended by a
variation letter dated 2 October 2017
12 months either party
Ben Waldron 1 June 2011 12 October 2020 12 months either party
Mike Edwards 4 September 2001 23 December 2020 12 months either party
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POLICY ON EXTERNAL APPOINTMENTS
The Group Board believes that it may be beneficial to the Group for Executives to hold non-executive directorships outside the
Group. Any such appointments are subject to approval by the Group Board and the Director may retain any fees received at the
discretion of the Group Board. No Executive Director currently holds any external non-executive directorships.
NONEXECUTIVE DIRECTORS’ TERMS OF ENGAGEMENT
Each of the Non-executive Directors are engaged under a market-standard Non-executive Director appointment letter, which
states that the appointment will continue for a renewable three-year term provided that the appointment must not continue for
more than nine years in total. In any event, each appointment is terminable by either party on one month’s written notice with no
other right to compensation for loss of office. All Non-executive Directors are subject to annual re-election at each AGM. The dates
of appointment of each of the Non-executive Directors serving at the date of this report are summarised in the table below.
Non-executive Director Date of joining Bakkavor Date of contract or date of first appointment
Simon Burke (Chairman) 1 December 2016 20 October 2017
Umran Beba 1 September 2020 1 September 2020
Jill Caseberry 1 March 2021 24 February 2021
Patrick L. Cook 12 July 2018 12 July 2018
Lydur Gudmundsson 1 August 1986 (founder) 20 October 2017
Denis Hennequin 20 October 2016 20 October 2017
Jane Lodge 3 April 2018 3 April 2018
Sanjeevan Bala 1 August 2021 5 July 2021
The Chairman, in consultation with the Executive Directors, is responsible for proposing changes to the Non-executive
Directors’ fees. The Remuneration Committee is responsible for proposing changes to the Chairman’s fees.
In proposing such fees, account is also taken of the time commitments of the Group’s Non-executive Directors. The decision
on fee changes is taken by the Group Board as a whole. Individual Non-executive Directors do not take part in discussions in
relation to their own remuneration.
SHAREHOLDER VIEWS
The Group Board is committed to open dialogue with shareholders and intends to engage directly with them and their
representative bodies when considering any significant changes to remuneration arrangements. The Remuneration Committee
will consider shareholder feedback received following each AGM, as well as any additional feedback and guidance received
from time to time. This feedback will be considered by the Remuneration Committee as it develops the Company’s remuneration
framework and practices going forward. Assisted by its independent adviser, the Remuneration Committee also actively
monitors developments in the expectations of institutional investors and their representative bodies.
EMPLOYMENT CONDITIONS
The Remuneration Committee is regularly updated throughout the year on pay and conditions applying to Group colleagues,
including any significant changes to employment conditions. However, no specific remuneration comparison measurements
were used to inform the Remuneration Committee’s policy design considerations.
The Remuneration Committee has considered the new provisions in the UK Corporate Governance Code 2018 with regards
to consulting with colleagues. A significant pay and benefits benchmarking exercise was undertaken and presented to the
Remuneration Committee during the year. In addition, the designated workforce engagement Non-executive Director,
Jill Caseberry, had two sessions with Bakkavor’s Group Employee Forum to talk to members on executive remuneration and
ensure that the ‘colleague voice’ is heard in the boardroom. The first session in July 2021 was an introduction to Jill Caseberry
and to explain her role as designated workforce engagement Non-executive Director which was conducted via video conference.
The second session, postponed from late 2021 (due to COVID-19 restrictions) until February 2022 in order to take place face to
face was focused on the alignment of executive remuneration with the wider company pay policy. Other topics at the session
included an overview on corporate governance; the role of the Remuneration Committee; getting senior reward right; how
Executive remuneration packages work; and a ‘Q&A’ session. It was well received by our colleagues and was considered to be
an engaging, informative and successful session.
The Policy for Executive Directors, which is set out over the previous pages, supports the business needs of the Company,
ensuring it promotes long-term success whilst enabling it to attract, retain and motivate Senior Executives of a high calibre.
The Remuneration Committee is satisfied that the Policy supports the Company’s strategy of growing long-term shareholder
value and appropriately balances fixed and variable remuneration. With a high proportion of reward delivered in the form of
equity (for Executives other than the current CEO), this ensures that Executives have a strong alignment with shareholders
through the Company’s share price.
GOVERNANCE
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DIRECTORS’ REMUNERATION REPORT
CONTINUED
ANNUAL REPORT ON REMUNERATION
This part of the report has been prepared in accordance with Part 3 of The Large and Medium-sized Companies and Groups
(Accounts and Reports) Regulations 2008 (as amended) and Rule 9.8.6 of the Listing Rules. The Annual Statement and Annual
Report on Remuneration will be put to a single advisory shareholder vote at the AGM on 25 May 2022.
REPORT OF THE REMUNERATION COMMITTEE
Remuneration Committee membership
The Remuneration Committee is formally constituted and operates on written Terms of Reference which are available at
www.bakkavor.com. Members of the Remuneration Committee during the year were:
Attendance
Denis Hennequin (Remuneration Committee Chair) 4 out of 4
Umran Beba 4 out of 4
Jill Caseberry 2 out of 2
Jill Caseberry joined the Group Board and the Remuneration Committee on 1 March 2021.
The biographies of the Remuneration Committee members are set out on page 96.
Members of management including the CEO, the CFO, the CPO, the Group Head of Reward and the independent adviser to
the Remuneration Committee are invited to attend meetings where appropriate. The Group Company Secretary and General
Counsel is the secretary to the Remuneration Committee. Attendees are not involved in any decisions and are not present for
any discussions regarding their own remuneration. The Company Chairman may attend meetings but is not present when his
own remuneration arrangements are being decided.
Independent advisers
The Remuneration Committee takes account of information from both internal and independent sources, including FIT
Remuneration Consultants LLP (“FIT”) which acts as the Remuneration Committee’s independent adviser. FIT was appointed
by the Remuneration Committee as a result of a tender process and advised the Remuneration Committee on all aspects of
Senior Executive remuneration, including remuneration trends and corporate governance best practice.
FIT is a founder member of the Remuneration Consultants’ Group and complies with its Code of Conduct, which sets out
guidelines to ensure that its advice is independent and free of undue influence. The Remuneration Committee reviews the
performance and independence of its advisers on an annual basis. The Remuneration Committee was satisfied that FIT’s
advice was independent and objective. Bakkavor incurred fees of £65,608 excluding VAT during 2021 relating to Remuneration
Committee advice. FIT billed on a time and materials basis and did not provide any other services other than share plan
implementation advice to Bakkavor during 2021.
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SINGLE TOTAL FIGURE OF DIRECTORS’ REMUNERATION YEAR ENDED 25 DECEMBER 2021 (AUDITED)
The total remuneration of the individual Directors who served during the financial year is shown below.
£000s
Base
salary Benefits
1
Pension
Total fixed
remuneration Bonus LTIP
Total variable
remuneration
Total
remuneration
Executive Directors
Agust Gudmundsson 2021 769 22 26 817 461 – 461 1,278
2020 577 2 115 694 0 – 0 694
Ben Waldron
2
2021 370 12 11 394 347 – 347 740
2020 – – – – – – – –
Mike Edwards
2
2021 481 31 85 596 451 – 451 1,048
2020 – – – – – – – –
Peter Gates
3
2021 – – – – – – – –
2020 455 12 96 563 0 0 0 563
Non-executive Directors
Simon Burke (Chairman) 2021 206 – – 206 – – – 206
2020 177 1 – 178 – – – 178
Umran Beba
4
2021 72 1 – 73 – – – 73
2020 23 – – 23 – – – 23
Denis Hennequin 2021 72 – – 72 – – – 72
2020 62 – – 62 – – – 62
Jane Lodge 2021 72 1 – 73 – – – 73
2020 62 3 – 65 – – – 65
Jill Caseberry
4
2021 60 – – 60 – – – 60
2020 – – – – – – - –
Patrick L. Cook
5
2021 0 – – – – – – 0
2020 0 – – – – – – 0
Lydur Gudmundsson
6
2021 267 1 – 268 – – – 268
2020 208 2 – 210 – – – 210
Sanjeevan Bala
4
2021 30 – 30 – – – 30
2020 – – – – – – – –
Todd Krasnow
7
2021 – – – – – – – –
2020 68 7 – 75 – – – 75
Sue Clark
7
2021 – – – – – – – –
2020 56 – – 56 – – – 56
Total 2021 2,399 68 122 2,589 1,259 0 1,259 3,848
2020 1,688 27 211 1,926 0 0 0 1,926
Notes to the remuneration table:
1 For Executive Directors, taxable benefits comprised car allowance and fuel cards, regional allowance and private medical cover. Lydur Gudmundsson is also entitled to medical cover
in the UK for the benefit of his family.
2 Ben Waldron and Mike Edwards joined the Group Board on 27 December 2020.
3 Peter Gates stepped off the Group Board on 26 December 2020.
4 Umran Beba, Jill Caseberry and Sanjeevan Bala joined the Group Board on 1 September 2020, 1 March 2021 and 1 August 2021 respectively.
5 Patrick L. Cook receives no fee for his services.
6 Lydur Gudmundsson’s Non-executive Director base fee is £71,925 p.a. In addition, given his unique expertise and insight into the Company’s business as a founder of the Bakkavor Group,
pursuant to an agreement between Lydur Gudmundsson and Bakkavor Iberica S.L.U., and a service agreement between Bakkavor Iberica S.L.U. and Bakkavor Holdings Limited, Lydur
Gudmundsson will continue to be employed to provide consulting services to the Group for a fee of €230,000 per annum. The exchange rate used to convert to GBP for the above table is
£1:€1.18 (2020: £1:€1.11).
7 Sue Clark and Todd Krasnow stepped down from the Group Board on 27 November 2020 and 19 October 2020 respectively.
2021 ANNUAL BONUS (AUDITED)
During the year, colleagues were eligible for an annual bonus, subject to meeting performance objectives established at the
beginning of the financial year by reference to suitably challenging corporate goals over the 12-month period. In 2021, the
annual bonus targets and performance-related outcomes were as follows:
Metrics Weighting
Threshold
(0%)
Maximum
(100%)
Actual
performance
%
outcome
Group Adjusted EBIT 75% £90m £102m £102m 75%
Employee turnover 25% 18.8% 16.9% 27.8% 0%
Total (% of max) 75%
GOVERNANCE
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Annual Report & Accounts 2021
DIRECTORS’ REMUNERATION REPORT
CONTINUED
The annual bonus was based 75% on Group Adjusted EBIT and 25% on colleague engagement measured through
employee turnover. Financial performance in the year was strong as the business recovered from the pandemic, resulting
in a Group Adjusted EBIT performance of £102 million. Employee turnover was particularly difficult in 2021 as retention
became increasingly challenging as a result of the combined effects of Brexit and the associated supply of labour; the
re-starting of the economy post lockdown; and upward pressure on pay due to inflation. Two-thirds of the bonus earned
will be paid in cash and the remaining one-third will be deferred in shares (and in cash for the CEO) for three years.
LONGTERM INCENTIVE PLAN
Awards with performance periods ending in the year (audited)
Prior to their joining the Group Board, Mike Edwards was granted awards over 236,118 performance shares and 118,094
restricted shares and Ben Waldron was granted awards over 96,852 performance shares and 48,426 restricted shares under
the LTIP on 9 April 2019 which are capable of vesting on 9 April 2022. The restricted shares, which are subject to a service
condition only, will vest in full. The performance share awards were based 50% on relative TSR targets measured over
a three-year period ending on 25 December 2021 and 50% on EPS targets for the year ended 25 December 2021.
Performance over the period was adversely affected by the pandemic and this resulted in neither measure being achieved.
The performance shares will therefore lapse.
Measure
Threshold
(25% vesting)
Maximum
(100% vesting) Actual
Vesting
(% of maximum)
Relative TSR (50%)
1
Median Upper quartile Below median 0%
EPS (50%) 16.5 pence 18.6 pence 10.4 pence 0%
1 The relative TSR peer group comprised Associated British Foods, A.G Barr, Britvic, Coca-Cola HBC, Compass Group, Cranswick, Dairy Crest Group, Devro, Diageo, Domino’s Pizza Group,
DP Eurasia, EI Group, Fuller Smith & Turner, Greencore Group, Greene King, Greggs, Hilton Food Group, JD Wetherspoon, J Sainsbury, Marston’s, McColl’s Retail, Mitchells & Butlers,
Morrisons (WM), Ocado Group, Premier Foods, PureCircle, Restaurant Group, SSP Group, Stock Spirits Group, Tate & Lyle, Tesco, Unilever and Whitbread.
Awards granted in 2021 (audited)
On 26 April 2021 the following awards, structured as nil-cost options, were made under the LTIP to the CFO and UK COO.
The CEO does not participate in the LTIP:
Date of grant
Basis of award
(% of salary)
Face value
of awards at grant
1
Number of
shares under award Date of vesting
Ben Waldron 26 April 2021 150% £554,999 419,818 26 April 2024
Mike Edwards 26 April 2021 150% £721,643 545,872 26 April 2024
1 Based on the three-day average share price of £1.322 to 23 April 2021. 25% vests for delivering threshold performance.
The awards will ordinarily become exercisable on the third anniversary of grant subject to continued service and to the extent
to which adjusted earnings per share (“EPS”) and total shareholder return (“TSR”) performance conditions are satisfied that
each apply with equal weighting. The performance period for both measures ends in December 2023.
Relative TSR
1
Earnings per share (for FY2023) Portion of award vesting
Below median Less than 12.7p 0%
Median 12.7p 25%
Between median and upper quartile Between 12.7p and 14.7p Pro-rata on straight-line basis between 25% and 100%
Upper quartile 14.7p 100%
1 TSR is measured over the three-year period commencing from the start of the 2021 financial year against the following companies: Associated British Foods, A.G Barr, Britvic, Coca-Cola
HBC AG, Compass Group, Cranswick, Devro, Diageo, Domino’s Pizza Group, Fuller Smith & Turner, Greencore Group, Greggs, Hilton Food Group, JD Wetherspoon, J Sainsbury, Marston’s,
Mitchells & Butlers, Morrisons, Ocado Group, Premier Foods, Restaurant Group, SSP Group, Stock Spirits Group, Tate & Lyle, Tesco, Unilever and Whitbread.
The Remuneration Committee recognises that share prices have been volatile in recent times and to avoid any excessive
windfall gains, these awards are subject to a value cap under which an automatic reduction in the size of the award shall
apply to the extent that the prevailing share price at the time of the settlement of the award exceeds £3.60.
Awards will be subject to a two-year holding period following vesting as well as malus and clawback provisions.
TOTAL SHAREHOLDER RETURN (“TSR”) AND CEO SINGLE FIGURE HISTORY
The chart below shows the Company’s TSR performance compared with that of the FTSE 250 Index (excluding investment
trusts) and the FTSE SmallCap over the period from the date of the Company’s Admission to the London Stock Exchange
to 25 December 2021. The FTSE 250 and SmallCap indices are considered by the Group Board to be the most appropriate
broad equity comparator indices for Bakkavor as it has been a member of each in the recent period.
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Annual Report & Accounts 2021
TSR is defined as the return on investment obtained from holding a company’s shares over a period. It includes dividends paid,
the change in the capital value of the shares and any other payments made to or by shareholders within the period.
0
20
40
60
80
100
120
140
25 Dec
2021
26 Dec
2020
28 Dec
2019
29 Dec
2018
30 Dec
2017
15 Nov
2017
FTSE 250 Ex Investment Trusts
Value (£) (rebased)
Bakkavor Group FTSE SmallCap Ex Investment Trusts
Source: Datastream (Thomson Reuters)
CEO SINGLE FIGURE
CEO
CEO single figure of
total remuneration
£’000
Annual bonus payout
as a proportion
of maximum
LTIP vesting
as a proportion
of maximum
2021 Agust Gudmundsson £1,278 75% n/a
2020 Agust Gudmundsson £694 0% n/a
2019 Agust Gudmundsson £987 12.4% n/a
2018 Agust Gudmundsson £864 0% n/a
The CEO does not participate in the LTIP.
OUTSTANDING LTIP AWARDS
Details of all outstanding performance share awards (“PSAs”) and restricted share awards (“RSAs”) held by the CFO and UK COO:
Award type
1
Ex.
price
Grant
date
Interest at
December
2020
Awards
granted in
year
Awards
vested in
year
Awards
lapsed
in year
Interest at
December
2021 Date of vesting
Ben Waldron LTIP 2017
2
£0.764 1 July 2017 134,163 134,163 1 April 2020
LTIP 2018 PSA £0 9 April 2018 59,863 59,863 9 April 2021
LTIP 2019 PSA £0 9 April 2019 96,852 96,852 9 April 2022
LTIP 2019 RSA £0 9 April 2019 48,426 48,426 9 April 2022
LTIP 2020 PSA £0 14 Oct 2020 208,333 208,333 14 Oct 2023
LTIP 2020 RSA £0 14 Oct 2020 104,166 104,166 14 Oct 2023
LTIP 2021 PSA £0 26 Apr 2021 419,818 419,818 26 Apr 2014
Mike Edwards LTIP 2017
2
£0 1 July 2017 600,000 600,000 1 April 2020
LTIP 2017
2
£0 1 July 2017 400,000 400,000 1 April 2022
LTIP 2018 PSA £0 9 April 2018 162,770 162,770 9 April 2021
LTIP 2018 RSA £0 9 April 2018 81,385 81,385 81,385 9 April 2021
LTIP 2019 PSA £0 9 April 2019 236,188 236,188 9 April 2022
LTIP 2019 RSA £0 9 April 2019 118,094 118,094 9 April 2022
LTIP 2020 PSA £0 14 Oct 2020 460,121 460,121 14 Oct 2023
LTIP 2020 RSA £0 14 Oct 2020 230,060 230,060 14 Oct 2023
LTIP 2021 PSA £0 26 Apr 2021 545,872 545,872 26 Apr 2024
1 Ben Waldron and Mike Edwards received restricted share awards in their roles as Senior Executives prior to joining the Group Board.
2 The 2017 LTIP was in operation prior to listing. The values in the above table for the 2017 LTIP for the UK COO are those awards (which were structured as nil cost options), 600,000 that
vested in 2020 and 400,000 that will vest in April 2022 and both tranches remain exercisable until 1 July 2027.
GOVERNANCE
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Annual Report & Accounts 2021
DIRECTORS’ REMUNERATION REPORT
CONTINUED
PAYMENTS TO FORMER DIRECTORS AND FOR LOSS OF OFFICE (AUDITED)
Peter Gates retired from the Group Board on 26 December 2020. As disclosed in last year’s report, Peter received his base
salary, benefits and pension to the date of ceasing employment and did not receive any payment in lieu of notice. As a retiree,
Peter was treated as a good leaver and his outstanding share awards (as set out in last year’s report) will vest on their normal
vesting dates with LTIP awards subject to performance assessment and a time pro-rata reduction.
His 2019 LTIP award was subject to TSR and EPS measures and lapsed in full as set out on page 135.
EXTERNAL DIRECTORSHIPS
No Executive Directors currently hold non-executive directorships at any companies outside the Bakkavor Group.
STATEMENT OF DIRECTORS’ SHAREHOLDINGS AND SHARE INTERESTS (AUDITED)
The share interests of each Director as at 25 December 2021 (together with interests held by connected persons) are set out
in the table below. As a direct link between executive remuneration and the interests of shareholders, the Remuneration
Committee has implemented shareholding guidelines for Executive Directors and key senior colleagues. The guidelines require
that Executive Directors build up and maintain an interest in the Ordinary shares of the Company that is 200% of their annual
base salary and retain half of any vested deferred bonus and LTIP awards (net of any taxes due) until this guideline is met.
Shareholdings for Directors who have held office during the year ended 25 December 2021 are set out as a percentage of salary
or fees in the table below. During the period from 25 December 2021 to the publication of this report, there have been no
changes in the Directors’ share interests and none of the Directors hold any loans against their shares or otherwise use their
shares as collateral.
Beneficially
owned shares
25 December 2021
Vested
but unexercised
share awards
Unvested share
awards – LTIP
Unvested share
awards – DABP
Total
interests held at
25 December 2021
Shareholding
as a %
of salary
2
Executive Directors
Agust Gudmundsson 142,103,505 – – – 142,103,505 24,696.0%
1
Ben Waldron 6,380 134,163 877,595 - 1,018,138 2.30%
1
Mike Edwards – 681,385 1,990,335 - 2,671,720 12.0%
1
Non-executive Directors
Simon Burke (Chairman) 50,000 – – – 50,000 n/a
Sanjeevan Bala – – – – – n/a
Patrick L. Cook – – – – – n/a
Lydur Gudmundsson 142,103,505 – – – 142,103,505 n/a
Denis Hennequin – – – – – n/a
Jill Caseberry – – – – – n/a
Jane Lodge – – – – – n/a
Umran Beba – – – – – n/a
1 Calculation based on share price of £1.336 as at 25 December 2021.
2 Shares owned outright by the Executive Director or a connected person are included. Shares or share options which are subject to a performance condition are not included. Unvested
deferred bonus shares and vested LTIP awards (excluding pre-IPO awards) which remain unexercised are included on a net of tax basis and count towards the in employment guideline.
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PERCENTAGE CHANGE IN REMUNERATION
The table below shows the percentage change in salary, benefits and annual bonus earned between the 2021 financial year and
the prior year for the Group Board compared to the average earnings of all of the Group’s other UK colleagues. The change in
remuneration is also shown for the previous year which compares 2020 with 2019. While the regulations require comparison
against employees of the Company (being Bakkavor Group plc), the Remuneration Committee chose the Group’s UK salaried
colleagues for pay comparison with the CEO as the most meaningful comparator group as the Company itself does not have
any employees.
2021 2020
Salary / Fees Benefits Annual bonus Salary / Fees Benefits Annual bonus
Agust Gudmundsson
1
0.00% 1000% n/a 0% -75% -100%
Peter Gates n/a n/a n/a 0% 0% -100%
Simon Burke (Chairman)
1
2.75% -100% n/a 0% 100% n/a
Jill Caseberry n/a n/a n/a – – –
Patrick L. Cook n/a n/a n/a 0% n/a n/a
Lydur Gudmundsson
1
2.75% -50% n/a 0% -50% n/a
Denis Hennequin
1
2.75% 0% n/a 0% n/a n/a
Sanjeevan Bala n/a n/a n/a – – –
Jane Lodge
1
2.75% -66.7% n/a 0% 100% n/a
Umran Beba
1
2.75% 100% n/a 0% n/a n/a
Colleague average 2.75% 0% 300% 0% n/a n/a
1 As part of the swift actions taken by the Group Board to preserve cash at the onset of the pandemic, the Group Board agreed on voluntary reductions in salary/fees for three months from April to
June 2020. The Chairman and Non-executive Directors took a 50% reduction in fees, while the Group’s founders (CEO, Agust Gudmundsson and Non-executive Director, Lydur Gudmundsson)
did not take a salary or fee during this period. These temporary salary and fee reductions have been excluded to enable easier like-for-like comparisons between 2020 and 2021.
2 Ben Waldron and Mike Edwards are excluded from the ‘Percentage change in remuneration’ table as they joined the Group Board on 27 December 2020.
Given the makeup of our c.19,000 colleagues, the majority of UK colleagues do not participate in an annual bonus scheme or
receive taxable benefits and therefore it is not possible to make any meaningful comparison on the percentage change in annual
bonus or benefits.
RELATIVE IMPORTANCE OF SPEND ON PAY
The following table shows the Company’s actual spend on pay for all Group colleagues relative to dividends:
2021 2020 % increase
Staff costs £539.2m £514.0m 4.9%
Dividends £38.5m – n/a
CEO PAY RATIO
In line with the reporting regulations, set out below is the ratio of Group CEO pay compared to the pay of UK full-time equivalent
colleagues of the Group for the financial year ended 25 December 2021. We expect the pay ratio to vary from year to year, driven
largely by the annual bonus outcome for the Group CEO, which will significantly outweigh any other changes in pay at Bakkavor.
The pay ratios are calculated using Option B. The CEO single total figure remuneration of £1,278,000 is given in the table above.
The Remuneration Committee is satisfied that the pay ratio is reasonable and consistent with the Company’s wider policies on
colleague pay, reward and progression; see page 129 for further details.
Method
25th percentile
pay ratio Median pay ratio
75th percentile
pay ratio
2021 Option B 69:1 59:1 46:1
2020 Option B 41:1 34:1 28:1
2019 Option B 56:1 39:1 36:1
The reason for the significant increase in the pay ratio from Full-Year ended 2020 is two-fold. Firstly, during 2020 and following
the onset of the pandemic, the CEO voluntarily received no pay for the three-month period from April to June resulting in
an ‘artificially’ lower figure for 2020. Secondly, the figure for Full-Year ended 2021 includes a payment for bonus (75% of the
maximum) compared to Full-Year ended 2020 when no bonus was paid. There was no basic pay increase with effect from
January 2021. For this reason, the Group believes the median pay ratio for the relevant financial year is consistent with the
pay, reward and progression policies for the Group’s UK colleagues taken as a whole.
GOVERNANCE
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Annual Report & Accounts 2021
DIRECTORS’ REMUNERATION REPORT
CONTINUED
Bakkavor has calculated the pay ratio using Option B alongside its gender pay data, as it involved the simplest method of
calculation, given our large number of colleagues. Total remuneration for all UK full-time equivalent colleagues of the Company
has been calculated in accordance with the Option B methodology. The gender pay gap data from April 2021 was used to identify
colleagues at the 25th, 50th and 75th percentiles. Data was analysed for a number of colleagues around each quartile figure to
ensure that there were no anomalies. Remuneration for each of these individuals was then re-calculated for the 2021 financial
year, in line with the methodology for calculating the CEO’s remuneration. The Remuneration Committee is satisfied that the
resulting figures are reasonable and are appropriately representative for the purposes of the CEO pay ratio calculations.
Set out in the table below is the base salary and total pay and benefits for each of the percentiles.
25th percentile Median 75th percentile
Salary £18,252 £21,642 £27,283
Total pay and benefits £18,608 £21,642 £27,712
STATEMENT OF IMPLEMENTATION OF REMUNERATION POLICY IN 2022
Annual base salary
Base salaries for the Executive Directors, effective 1 January 2022, are set out below:
Base salary 2022 Base salary 2021 % increase
Agust Gudmundsson £789,891 £768,750 2.75%
Ben Waldron £406,000 £370,000 9.7%
Mike Edwards £494,326 £481,096 2.75%
Base salaries for the CEO and UK COO have increased in line with the budgeted increase for the UK salaried workforce which is
the most relevant comparator group. As explained earlier, the base salary for the CFO has increased above the workforce rate
reflecting his performance, experience in the role and increased breadth of responsibilities.
BENEFITS AND PENSION
Benefits and pension will be provided in line with the 2021 Directors’ Remuneration Policy.
BONUS
The 2022 annual bonus maximum, as a percentage of base salary, is as follows:
Agust Gudmundsson 80% of salary
Mike Edwards 125% of salary
Ben Waldron 125% of salary
For 2022, the annual bonus for the Executive Directors will comprise two measures, consistent with the approach taken in 2021:
• Group Adjusted EBIT (75%).
• Colleague engagement measured through employee turnover (25%).
It is not possible to disclose specific targets in advance, as this would give a clear indication of the Group’s business objectives,
which are commercially sensitive. However, full details of the targets and performance against them will be disclosed in next
year’s Annual Report.
Awards for financial measures will be subject to an underlying performance override, enabling them to be scaled back to reflect
the Group’s underlying performance. Malus and clawback provisions apply.
In line with the Remuneration Policy, one-third of any bonus earned will be deferred for three years, conditional upon continued
employment. Deferral for the CEO will be in cash (given his current shareholding), whereas the CFO’s and UK COO’s deferral
will be in shares.
LONGTERM INCENTIVE PLAN
The Remuneration Committee intends to grant awards of nil-cost options under the Long-Term Incentive Plan in April 2022 to
the CFO and UK COO in line with the Directors’ Remuneration Policy. Reflecting his founder status and his current shareholding,
the current CEO does not participate in the Long-Term Incentive Plan.
The awards granted to the CFO and UK COO will have a face value of 150% of salary, with the exact number of shares to be
granted to be determined with reference to the prevailing share price around the date of grant.
The awards will be subject to relative TSR (measured against a bespoke group of food and drink companies) and EPS measures,
each with equal weighting. As the UK emerges from the latest COVID variant, the Remuneration Committee is determining the
precise EPS targets at the time this report is being signed off and these will be set out in the RNS at grant.
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Awards will be subject to a two-year holding period following vesting as well as malus and clawback. In addition, before an
award vests the Remuneration Committee must be satisfied that the underlying performance of the Group is satisfactory.
The Remuneration Committee believes that having a performance override is an important feature of the plan, as it mitigates
the risk of unwarranted vesting outcomes.
NONEXECUTIVE DIRECTORS’ FEES FOR 2022
Fees for the Non-executive Directors and Chairman have increased by 2.75% and are as follows:
Fee
Chairman £211,151
Base Non-executive Director fee £73,903
Notes:
Patrick L. Cook does not receive any fees for his role as Non-executive Director.
Given his unique expertise and insight into the Company’s business as a founder of the Bakkavor Group, pursuant to an agreement between Lydur Gudmundsson and Bakkavor Iberica S.L.U.,
and a service agreement between Bakkavor Iberica S.L.U. and Bakkavor Holdings Limited, Lydur Gudmundsson is employed to provide consulting services to the Group for a fee of €230,000
per annum. Lydur Gudmundsson is also entitled to medical coverage in the UK for the benefit of his family.
No additional fee is payable to any Non-executive Directors for additional responsibilities such as serving on a Committee of the
Group Board. Each Non-executive Director is also entitled to reimbursement of reasonable expenses, including transatlantic
travel expenses.
SHAREHOLDER VOTING
The Company is committed to ongoing shareholder dialogue and takes an active interest in voting outcomes. Where there are
substantial votes against resolutions in relation to Directors’ remuneration, the Company seeks to understand the reasons for
any such vote and will report any actions in response to it. The following table sets out actual voting at the AGM on 20 May 2021
in respect of the Directors’ Remuneration Report for the year ended 26 December 2020 and in respect of the current Directors’
Remuneration Policy:
Remuneration Report
Total number
of votes
% of
votes cast
For and Discretionary
1
556,235,173 98.97%
Against 5,795,516 1.03%
Total votes cast (excluding withheld votes) 562,030,689 100.00%
Total votes withheld 10,625 0.00%
Total votes cast (including withheld votes) 562,041,314 100.00%
1 13,951 were based on discretionary votes.
Remuneration Policy
Total number
of votes
% of
votes cast
For and Discretionary
1
560,488,633 99.72%
Against 1,552,056 0.28%
Total votes cast (excluding withheld votes) 562,040,689 100.00%
Total votes withheld 625 0.00%
Total votes cast (including withheld votes) 562,041,314 100.00%
¹ 13,951 were based on discretionary votes.
On behalf of the Group Board
Denis Hennequin
Chair, Remuneration Committee
7 March 2022
GOVERNANCE
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Annual Report & Accounts 2021
DIRECTORS’ REPORT
The Directors present their report, together with the
Audited Group Financial Statements, for the year ended
25 December 2021.
PRINCIPAL ACTIVITIES AND BUSINESS REVIEW
The Group produces and markets fresh prepared food in the
UK, US and China. The Company employs approximately 19,000
colleagues worldwide and is headquartered in London, UK.
DIRECTORS’ REPORT CONTENT
For the purposes of Companies Act 2006, the Strategic Report,
the Corporate Governance Report and the Directors’
Remuneration Report are all incorporated by reference into this
Directors’ Report and should be read as part of this report.
REGISTERED OFFICE
Bakkavor Group plc is incorporated as a public limited
company and is registered in England with the registered
number 10986940. Bakkavor Group plc’s registered office is
Fitzroy Place, 5th Floor, 8 Mortimer Street, London, W1T 3JJ.
Our registrars are Equiniti Limited, located at Aspect House,
Spencer Road, Lancing, West Sussex, BN99 6DA.
CORPORATE GOVERNANCE STATEMENT
Under the Financial Conduct Authority’s Disclosure Guidance
and Transparency Rules (“DTRs”) Rule 7, a requirement exists
for a corporate governance statement to be included in this
Directors’ Report. The corporate governance statement,
explaining how the Group complies with the Governance Code,
is set out on pages 91 to 93. A description of the composition
and operation of the Group Board and its Committees is set
out on pages 92 to 96.
Other than the area of non-compliance identified on page 91,
the Group has complied throughout the accounting period with
the 2018 UK Corporate Governance Code.
ENGAGEMENT WITH SUPPLIERS, CUSTOMERS AND OTHERS
In accordance with the Large and Medium-sized Companies
and Groups (Accounts and Report) Regulations 2008 (as
amended by the Companies (Miscellaneous Reporting)
Regulations 2018), the Company’s statement on engagement
with, and having due regard to, the interests of colleagues
and key stakeholders is contained within the Section 172
statement in the Strategic Report on pages 66 to 71.
STRATEGIC REPORT
Section 414A of the Companies Act 2006 (“the Act”) requires
the Directors to present a Strategic Report in the Annual
Report and Financial Statements. This information can be
found on pages 1 to 87. The Directors’ are satisfied with
the Group’s net asset position as at 25 December 2021.
MANAGEMENT REPORT
For the purposes of DTR Rules 4.1.5R (2) and 4.1.8, the
Directors’ Report and the Strategic Report on pages 1 to 87
comprise the Management Report.
DISCLOSURES
This Directors’ Corporate Governance Report fulfils the
requirements of the Directors’ Report for the purposes of the
Act. The Strategic Report can be found on pages 1 to 87 and
encompasses our corporate social responsibility report.
In line with the Regulations which implement the European
Union Accounting Directive (SI 2015/980), a complete list of
the Group’s subsidiaries has been included on pages 206 to 207
to comply with section 409 of the Act.
We have chosen, in accordance with the Act, to include certain
information in our Strategic Report or Financial Statements
that would otherwise be required to be disclosed in the
Directors’ Report. This is as follows:
Page
Important events since the financial year end 208
Likely future developments in the business 22 to 25
Research and development 145
Use of financial instruments 168
Colleague engagement 18
Greenhouse gas emissions 60
Risk management and risks 74 to 86
Details of subsidiaries 206 to 207
LISTING RULE 9.8.4 DISCLOSURES
In accordance with Listing Rule 9.8.4 of the UK Financial
Conduct Authority’s Listing Rules, the table below sets out
the location of the following sections/information within the
Annual Report and Accounts:
Listing
Rule
9.8.4 Required disclosure Page reference
(1) Interest capitalised and
tax relief
Note 9 to the Financial
Statements
(2) Publication of unaudited
financial information
Not applicable
(4) Details of long-term
incentive schemes
Note 31 to the Financial
Statements and pages 124 to
141 of Directors’ Remuneration
Report
(5) Waiver of emoluments
by a Director
Pages 121 to 141 of Directors’
Remuneration Report
(6) Waiver of future
emoluments by a Director
Pages 121 to 141 of Directors’
Remuneration Report
(7) Non pre-emptive issues
of equity for cash
Not applicable
(8) Non pre-emptive issues
of equity for cash by major
subsidiary undertakings
Not applicable
(9) Parent participation in a
placing by a listed subsidiary
Not applicable
(10) Contracts of significance
involving a Director
Page 144 of Directors’ Report
(11) Provision of services by
a controlling shareholder
Page 144 of Directors’ Report
(12) Shareholder waivers
of dividends
Not applicable
(13) Shareholder waivers
of future dividends
Not applicable
(14) Agreements with
controlling shareholders
Page 144 of Directors’ Report
RESULTS
The results for the year ended 25 December 2021 are set out
in the Financial Statements on page 157.
142
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Annual Report & Accounts 2021
DIVIDEND
The Group Board paid an interim dividend of 2.64 pence per
Ordinary share on 15 October 2021 to shareholders registered
on the record date at 17 September 2021 and will propose a
final dividend of 3.96 pence per Ordinary share at the Company’s
AGM on 25 May 2022. This will result in a total dividend for the
financial year 2021 of 6.60 pence per Ordinary share.
Going forward, the Group Board expects to maintain a
progressive dividend policy over the medium term and the
interim dividend to comprise approximately 40% of the total
annual dividend.
The Group’s profit for the financial year, after taxation,
amounts to £56.8 million (2020: £34.1 million).
DIRECTORS’ INSURANCE AND INDEMNITIES
Bakkavor has made qualifying third-party indemnity provisions
(as defined in the Act) for the benefit of its Directors. These
provisions were in force throughout the year and remain at
the date of approval of this Annual Report and Accounts.
In accordance with the Articles, and to the extent permitted
by law, Bakkavor may indemnify its Directors out of its own
funds to cover liabilities arising as a result of their office.
Bakkavor holds Directors’ and officers’ liability insurance
cover for any claim brought against Directors or officers for
wrongful acts in connection with their positions, but the cover
does not extend to claims arising from dishonesty or fraud.
APPOINTMENT AND RETIREMENT OF DIRECTORS
The rules governing the appointment and replacement of
Directors can be found in the Articles, the 2018 Code, the Act
and related legislation. Under the terms of reference of the
Nomination and ESG Committee, any appointment must be
recommended by the Nomination and ESG Committee for
approval by the Group Board.
At the AGM, all Directors will offer themselves for election or
re-election as appropriate to the Group Board. All Directors’
biographies are set out on pages 94 to 96.
SERVICE CONTRACTS
The Company’s policy regarding Directors’ service contracts
and appointment terms is to take account of market practice
and to ensure that notice periods are not excessive.
No Director has a service contract with a notice period in
excess of one year.
DIRECTORS’ SHARE INTERESTS
The share interests of the Directors as at 25 December 2021
and as at the date of the publication of this report are:
25 December 2021 Date of publication
Name
Number of
shares
% of voting
rights
Number of
shares
% of voting
rights
Simon Burke 50,000 0.01% 50,000 0.01%
Agust
Gudmundsson
142,103,505 24.52% 142,103,505 24.52%
Lydur
Gudmundsson
142,103,505 24.52% 142,103,505 24.52%
Ben Waldron 6,380 0.001% 6,380 0.001%
BOARD OF DIRECTORS
The Directors of the Company during the year are set out
below and Directors’ biographies are set out on pages 94 to 96
of this report. Subject to company law and the Articles, the
Directors may exercise all of the powers of the Company and
delegate their power and discretion to committees.
The powers of the Directors are set out in the Schedule of
Matters Reserved to the Group Board, which is available on
the Bakkavor website at www.bakkavor.com/en/investors/
governance/default.aspx.
Name Role
Effective date of
appointment
Appointments
Sanjeevan Bala Independent
Non-executive Director
1 August 2021
Jill Caseberry Independent
Non-executive Director
1 March 2021
Other
Simon Burke Chairman 20 October 2017
Umran Beba Independent
Non-executive Director
1 September 2020
Patrick L. Cook Non-independent
Non-executive Director
12 July 2018
Mike Edwards Chief Operating Officer 27 December 2020
Agust Gudmundsson Chief Executive Officer 28 September 2017
Lydur Gudmundsson Non-independent
Non-executive Director
20 October 2017
Denis Hennequin Independent
Non-executive Director
20 October 2017
Jane Lodge Independent
Non-executive Officer
3 April 2018
Ben Waldron Chief Financial Officer 27 December 2020
Subject to applicable law, the Articles and any directions given by
special resolution, the business of the Company will be managed by
the Group Board, which may exercise all powers of the Company.
ARTICLES OF ASSOCIATION
The Company’s Articles of Association set out the objects
and powers of the Company. The Articles of Association
detail the rights attaching to shares, the method by which
the Company’s shares can be purchased or re-issued, the
provisions which apply to the holding of and voting at general
meetings and the rules relating to the Directors, including
their appointment, retirement, re-election, duties and powers.
The Company’s Articles of Association may be amended by a
special resolution passed by the shareholders at an AGM or
EGM of the Company. A copy of the Articles of Association can
be obtained from the Company’s website, www.bakkavor.com/
en/investors/governance/default.aspx.
SHARE CAPITAL AND CAPITAL STRUCTURE
The Company’s issued share capital as at 25 December 2021
comprised a single class of share divided into Ordinary shares
of 2 pence each. At the date of publication, the Company’s
issued share capital comprised 579,425,585 Ordinary shares.
Details of the Company’s issued share capital are also shown
in Note 28 to the Consolidated Financial Statements.
Details of colleague share schemes are set out in Note 31 to
the Consolidated Financial Statements.
GOVERNANCE
143
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Annual Report & Accounts 2021
DIRECTORS’ REPORT
CONTINUED
RESTRICTIONS ATTACHING TO SHARES
The Company has a single class of share which carries no
right to fixed income. Each share is non-redeemable, carries
equal voting rights and ranks equally for dividends and capital
distributions, whether on a winding up or otherwise.
There are no specific restrictions on the size of a holding nor on
the transfer of Ordinary shares, which are both governed by the
general provisions of the Articles and prevailing legislation.
The Company is not aware of any agreements between
holders of securities that may result in restrictions on the
transfer of securities or that may result in restrictions on
voting rights.
There are no persons who hold securities carrying special
rights with regard to the control of the Company.
POWERS FOR THE COMPANY ISSUING OR BUYING BACK SHARES
Under the Articles, the Group Board has general and
unconditional authority for each prescribed period to exercise
all the powers of the Company to allot shares in the Company
or to grant rights to subscribe for or to convert any security
into shares in the Company in accordance with section 551
of the Act.
The Company was given authority at the 2021 AGM to make
market purchases of up to 10% of its issued share capital
as permitted under the Articles. The Company made no
purchases of its own Ordinary shares during the year ended
25 December 2021 and up to the date of this report.
This standard authority is renewable annually; the Directors
will seek to renew this authority at the AGM on 25 May 2022.
A special resolution will be proposed to renew the Directors’
authority to repurchase the Company’s shares within certain
limits and as permitted by the Articles at the AGM on
25 May 2022.
SIGNIFICANT AGREEMENTS AND RELATIONSHIP CHANGE
OF CONTROL
There are a number of agreements that take effect, alter, or
terminate upon a change of control of the Company, such as
commercial contracts, property lease arrangements and
colleague share plans. None of these are considered to be
significant and there are no contracts of significance involving
a Director (except as explained below) in terms of their likely
impact on the business of the Group as a whole.
The agreement that governs the Company’s Term Loan and
Revolving Credit Facilities (“Facilities Agreement”) provides
that, on a change of control, any lender may on notice cancel
its commitments under the Facilities Agreement. In the event
of a takeover, the exercise by the lenders under the Facilities
Agreement of the right to cancel could have a significant impact
on the business of the Group, as the outstanding amounts
thereunder would become immediately due and payable.
The Directors are not aware of any agreements between the
Company and its Directors or colleagues that provide for
compensation for loss of office or employment that occurs
because of a takeover bid.
There are no colleague share scheme rights with regard to
control of the Company.
CONTROLLING SHAREHOLDERS
The aggregate shareholding in the Company of Carrion
Enterprises Limited (the corporate holding structure of Agust
Gudmundsson), Umbriel Ventures Limited (the corporate
structure of Lydur Gudmundsson) and their concert party
group (the “controlling shareholders”) is 50.15%. The Company
is party to a relationship agreement with Carrion Enterprises
Limited, Umbriel Ventures Limited, the trustee(s) of The A.G.
Trust (which owns 100% of Carrion Enterprises Limited) and
the trustee(s) of The L.G. Trust (which owns 100% of Umbriel
Ventures Limited).
Lixaner Co Limited (an entity which is a concert party of
Carrion Enterprises Limited and Umbriel Ventures Limited
following its acquisition of shares in the Company on 23 May
2019) executed a Deed of Adherence to the relationship
agreement on 15 April 2020 and is duly bound by its terms.
This agreement regulates the relationship between the
Company and the controlling shareholders as required by the
Listing Rules, including Listing Rule 9.2.2AR(2)(a) and Listing
Rule 6.1.4DR. In accordance with the requirements of Listing
Rule 9.8.4R(14), the Group Board confirms that: (i) the
Company has complied with the independence provisions set
out in the relationship agreement during the period under
review; and (ii) so far as the Company is aware, the controlling
shareholders complied with the independence provisions
set out in the relationship agreement during the period
under review.
There were no contracts for the provision of services to the
Group by a controlling shareholder.
MAJOR INTERESTS IN SHARES
The Group has been notified in accordance with the Financial
Conduct Authority’s (“FCA”) Disclosure Guidance and
Transparency Rules (“DTRs”), or was otherwise aware, that
the following held, or were beneficially interested in, 3% or
more of Bakkavor’s issued Ordinary shares. There were no
other interests in shares notified between 25 December 2021
and 7 March 2022, being the last practicable date.
25 December 2021 Date of publication
Name
Number of
Ordinary
shares
% of
voting
rights
Number of
Ordinary
shares
% of
voting
rights
Carrion Enterprises
Limited (corporate
holding structure of
Agust Gudmundsson)
142,103,505 24.52 142,103,505 24.52
Umbriel Venture
Limited (corporate
holding structure of
Lydur Gudmundsson)
142,103,505 24.52 142,103,505 24.52
BP-PE5 L.L.C.
(corporate holding
structure of the
Baupost Group)
143,832,928 24.82 143,832,928 24.82
Ruffer LLP 29,342,732 5.06 29,342,732 5.06
Aberforth Partners LLP 28,996,413 5.0 28,996,413 5.0
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Annual Report & Accounts 2021
ENGAGEMENT WITH SHAREHOLDERS
The Group Board supports the aims of the 2018 Code and the
UK Stewardship Code to promote engagement and interaction
between listed companies and their major shareholders.
The Group Board welcomes the opportunity for investors
and shareholders to engage directly with the Chairman
and Senior Independent Director, Audit and Risk and
Remuneration Committee Chairs and also with the CEO
and CFO. An appropriate range of investor relations events
following the publication of the full-year and half-year
results has been scheduled in 2022.
ANNUAL GENERAL MEETING
Bakkavor’s AGM provides the Group Board with the
opportunity to communicate with private and institutional
investors, with time being set aside at the meeting for
shareholders to ask questions.
At the AGM, the Chairman provides a brief summary of the
Company’s activities during the previous year. All resolutions
at the 20 May 2021 AGM were passed. As recommended by
the 2018 Code, all resolutions were voted on separately and
the final voting results, which included all votes cast for,
against and withheld, were released to the London Stock
Exchange as soon as practicable after the meeting.
This year’s AGM on 25 May 2022 will be in person and by webcast.
We are keeping arrangements relating to the AGM under review
as COVID-19 health guidance evolves. Shareholders will be
notified beforehand of the revised arrangements via our website
and by a Company announcement. The Group Board therefore
recommends that shareholders check the Company’s website
regularly and monitor Company announcements for any
updates. The Group Board considers the AGM to be an
important opportunity to engage with our shareholders.
Full details of the 25 May 2022 AGM arrangements and
the resolutions to be proposed at the AGM, as well as
shareholders’ rights with respect to attendance, participation
in the meeting and the process for submission of proxy votes
in advance of the meeting, will be set out in the Notice of AGM.
Additional information for shareholders can be found on our
website at www.bakkavor.com/en/investors/default.aspx.
RESEARCH AND DEVELOPMENT
Developing innovative new products remains core to the
business. The Group uses insights gained through analysis
of consumer research and data, as well as knowledge
of food trends sourced from around the world, to build an
understanding of what consumers want. Teams of chefs and
product development experts continuously create and test
recipes and work collaboratively with the Group’s commercial
and marketing teams to ensure products taste great, are
commercially viable and reinforce the Group’s market-leading
position. Further information can be found on pages 7 and 8
and Note 2 to the Group Financial Statements.
COLLEAGUES WITH DISABILITIES
Applications for employment by prospective colleagues with
disabilities are given full and fair consideration having regard
to candidates’ aptitudes and abilities. On occasions where
existing colleagues develop a disability, every effort is made
to ensure that their employment with the Group continues,
and any reasonable adjustments are made. Appropriate
training is also provided.
It is the policy of the Group that the training, career
development and promotion of colleagues with disabilities
should, as far as possible, be the same as that of our other
colleagues. For further information, see the Responsible
Recruitment and Employment section on page 46.
COLLEAGUE ENGAGEMENT
Open and constructive communication allows us to hear views
from all levels of the business, as well as keep our c.19,000
colleagues informed and updated. We perform a Group-wide
Employee Engagement Survey every 18 months and our latest
survey, completed in May 2021, had a response rate of 83%.
The 2021 survey provided valuable insights that were analysed
at local, site, business and Group level and have fed into
localised action plans and informed our colleague priorities.
Outside of the engagement survey, our UK GEF and SEF create
an open and regular channel of communication between
colleagues and management with outputs and discussion
points shared back in Management Board and Group Board
meetings to ensure colleagues’ interests are taken into
consideration when decisions are made. SEF representatives
are elected by peers and play a vital role in sharing best
practices across sites, supporting local causes and charities,
providing support and seeking advice, and the GEF comprises
SEF representatives at Group level. Following the COVID-19
pandemic, we sought feedback from the UK GEF, SEF and our
office-based colleagues on how the business can adapt our
ways of working and we responded to this by introducing a
number of initiatives such as increased flexibility in shift
patterns, part-time work and working from home.
Colleagues are provided with information on matters of
concern to them in their work through regular briefing
meetings and internal publications. To inform colleagues of
the economic and financial factors affecting the business,
regular updates are posted on the intranet and engagement
events are hosted with members of the Management Board.
In 2021, Jill Caseberry was appointed as the Company’s
designated workforce engagement Non-executive Director,
providing colleagues with a direct channel of communication
and an independent champion at Group Board level. Jill has
had an opportunity to engage with colleagues by attending a
session with the UK GEF and SEF via video conference in
July 2021 and a further in-person session in February 2022.
For further information, see pages 45 to 48 and 103.
GOVERNANCE
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Annual Report & Accounts 2021
DIRECTORS’ REPORT
CONTINUED
GREENHOUSE GAS EMISSIONS, ENERGY CONSUMPTION
AND ENERGY EFFICIENCY ACTION
Please see the Task Force on Climate-related Financial
Disclosures section on pages 54 to 61.
CHARITABLE DONATIONS
Bakkavor believes in giving back to those communities in
which we operate. Our Charity and Political Donations Policy
sets out the ways charitable giving may be channelled:
through monetary and product donations, supporting our
colleagues in their fundraising efforts and advocating skills
and volunteering events, where appropriate. We never use
charitable donations as a means to gain improper influence
and all monies given to charity in Bakkavor’s name are subject
to due process. Bakkavor does not give financial donations
or support to political individuals, representatives, parties
or causes in any country in which we operate.
For further information see page 48.
POLITICAL DONATIONS
No political donations were made during the financial year.
FINANCIAL INSTRUMENTS
Please refer to Note 27 to the Group Financial Statements.
FINANCIAL RISK MANAGEMENT
Please refer to Note 27 to the Group Financial Statements.
GOING CONCERN
The Directors have reviewed the historical trading performance
of the Group and the forecasts through to March 2023. The
Directors, in their detailed consideration of going concern,
have reviewed the Group’s future revenue projections and
cash requirements, which they believe are based on prudent
interpretations of market data and past experience.
The Directors have also considered the Group’s level of
available liquidity under its financing facilities. The Directors
have carried out a robust assessment of the significant risks
currently facing the Group. This has included scenario
planning on the implications of further inflation and continuing
labour availability issues. The Group has also modelled the
potential impact of lower sales volumes from further
COVID-19 restrictions, supply chain issues and reduced
consumer demand in response to increasing retail prices.
Having taken these factors into account, under either
scenario, the Directors consider that adequate headroom is
available based on the forecasted cash requirements of the
business. 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 in the future. Consequently, the Directors consider that
the Company and the Group have adequate resources to meet
their liabilities as they fall due through to March 2023. For this
reason, they continue to adopt the going concern basis in
preparing the Financial Statements.
Please see principal risks and uncertainties on pages 78 to 86
and Note 2 of the Financial Statements for further detail
including the potential impact of COVID-19 on the business.
VIABILITY STATEMENT
In line with Provision 31 of the 2018 Code, the Group Board
has a reasonable expectation that the Company will be able
to continue in operation and meet its liabilities as they
fall due over the three-year period to the end of 2024.
For further information see page 87 and the subsequent
events mentioned below.
DIRECTORS’ STATEMENT AS TO THE DISCLOSURE OF
INFORMATION TO THE AUDITORS
So far as each person who was a Director at the date of
approving this report is aware, there is no relevant audit
information, being information needed by the Auditors in
connection with preparing its report, of which the Auditors
are unaware. Each Director has taken all the steps that he or
she is obliged to take as a Director in order to make himself
or herself aware of any relevant audit information, and to
establish that the Company’s Auditors are aware of that
information. This confirmation is given pursuant to s418
of the Act and should be interpreted in accordance with
and subject to these provisions.
SUBSEQUENT EVENTS
On 1 March 2022 the Group extended the maturity date of £430
million of its core debt facilities from March 2025 to March 2026.
Please refer to Note 34 to the Group Financial Statements.
The Directors’ Report was approved by the Group Board on
7 March 2022.
By order of the Group Board
Annabel Tagoe-Bannerman
Group General Counsel and Company Secretary
Bakkavor Group plc
7 March 2022
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Annual Report & Accounts 2021
STATEMENT OF DIRECTORS’ RESPONSIBILITIES IN RESPECT OF THE FINANCIAL STATEMENTS
The directors are responsible for preparing the Annual Report
and the financial statements in accordance with applicable
law and regulation.
Company law requires the directors to prepare financial
statements for each financial year. Under that law the
directors have prepared the group financial statements in
accordance with international accounting standards in
conformity with the requirements of the Companies Act 2006
and the company financial statements in accordance with
United Kingdom Generally Accepted Accounting Practice
(United Kingdom Accounting Standards, comprising FRS 101
“Reduced Disclosure Framework”, and applicable law). The
group has also prepared financial statements in accordance
with international financial reporting standards adopted
pursuant to Regulation (EC) No 1606/2002 as it applies in
the European Union.
Under company law, 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 group and company and
of the profit or loss of the group for that period. In preparing
the financial statements, the directors are required to:
• select suitable accounting policies and then apply them
consistently;
• state whether applicable international accounting standards in
conformity with the requirements of the Companies Act 2006
and international financial reporting standards adopted
pursuant to Regulation (EC) No 1606/2002 as it applies in the
European Union have been followed for the group financial
statements and United Kingdom Accounting Standards,
comprising FRS 101, have been followed for the company
financial statements, subject to any material departures
disclosed and explained in the financial statements;
• make judgements and accounting estimates that are
reasonable and prudent; and
• prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the group and
company will continue in business.
The directors are responsible for safeguarding the assets
of the group and company and hence for taking reasonable
steps for the prevention and detection of fraud and other
irregularities.
The directors are also responsible for keeping adequate
accounting records that are sufficient to show and explain
the group’s and company’s transactions and disclose with
reasonable accuracy at any time the financial position of
the group and company and enable them to ensure that
the financial statements and the Directors’ Remuneration
Report comply with the Companies Act 2006.
The directors are responsible for the maintenance and
integrity of the company’s website. Legislation in the United
Kingdom governing the preparation and dissemination of
financial statements may differ from legislation in other
jurisdictions.
DIRECTORS’ CONFIRMATIONS
The directors consider that the Annual Report and accounts,
taken as a whole, is fair, balanced, and understandable and
provides the information necessary for shareholders to
assess the group’s and company’s position and performance,
business model and strategy.
Each of the directors, whose names and functions are listed
in Annual Report & Accounts confirm that, to the best of
their knowledge:
• the group financial statements, which have been prepared
in accordance with international accounting standards in
conformity with the requirements of the Companies Act 2006
and international financial reporting standards adopted
pursuant to Regulation (EC) No 1606/2002 as it applies in the
European Union, give a true and fair view of the assets,
liabilities, financial position and profit of the group;
• the company financial statements, which have been prepared
in accordance with United Kingdom Accounting Standards,
comprising FRS 101, give a true and fair view of the assets,
liabilities and financial position of the company; and
• the Strategic Report includes a fair review of the development
and performance of the business and the position of the group
and company, together with a description of the principal risks
and uncertainties that it faces.
Agust Gudmundsson
Chief Executive Officer
7 March 2022
GOVERNANCE
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Annual Report & Accounts 2021
INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF BAKKAVOR GROUP PLC
REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS
Opinion
In our opinion:
• Bakkavor Group plc’s group financial statements and company
financial statements (the “financial statements”) give a true and
fair view of the state of the group’s and of the company’s affairs
as at 25 December 2021 and of the group’s profit and the
group’s cash flows for the 52 week period then ended;
• the group financial statements have been properly prepared in
accordance with international accounting standards in
conformity with the requirements of the Companies Act 2006;
• the company financial statements have been properly prepared
in accordance with United Kingdom Generally Accepted
Accounting Practice (United Kingdom Accounting Standards,
comprising FRS 101 “Reduced Disclosure Framework”, and
applicable law); and
• the financial statements have been prepared in accordance
with the requirements of the Companies Act 2006.
We have audited the financial statements, included within the
Annual Report & Accounts (the “Annual Report”), which
comprise: the Consolidated Statement of Financial Position and
the Company Statement of Financial Position as at 25 December
2021; the Consolidated Income Statement, the Consolidated
Statement of Comprehensive Income, the Consolidated
Statement of Cash Flows, the Consolidated Statement of
Changes in Equity and the Company Statement of Changes in
Equity for the period then ended; and the notes to the financial
statements, which include a description of the significant
accounting policies.
Our opinion is consistent with our reporting to the Audit and
Risk Committee.
Separate opinion in relation to international financial
reporting standards adopted pursuant to Regulation (EC)
No 1606/2002 as it applies in the European Union
As explained in note 2 to the financial statements, the group,
in addition to applying international accounting standards in
conformity with the requirements of the Companies Act 2006,
has also applied international financial reporting standards
adopted pursuant to Regulation (EC) No 1606/2002 as it
applies in the European Union.
In our opinion, the group financial statements have been
properly prepared in accordance with international financial
reporting standards adopted pursuant to Regulation (EC)
No 1606/2002 as it applies in the European Union.
Basis for opinion
We conducted our audit in accordance with International
Standards on Auditing (UK) (“ISAs (UK)”) and applicable law.
Our responsibilities under ISAs (UK) are further described
in the Auditors’ responsibilities for the audit of the financial
statements section of our report. We believe that the audit
evidence we have obtained is sufficient and appropriate to
provide a basis for our opinion.
Independence
We remained independent of the group in accordance with
the ethical requirements that are relevant to our audit of the
financial statements in the UK, which includes the FRC’s
Ethical Standard, as applicable to listed public interest
entities, and we have fulfilled our other ethical responsibilities
in accordance with these requirements.
To the best of our knowledge and belief, we declare that
non-audit services prohibited by the FRC’s Ethical Standard
were not provided.
Other than those disclosed in the Report of the Audit and Risk
Committee, we have provided no non-audit services to the
company or its controlled undertakings in the period under audit.
OUR AUDIT APPROACH
Overview
Audit scope
• Full scope audit procedures performed over the complete
financial information of eight components, and specified
procedures over a further seven components.
• Central audit procedures performed by the group audit team
which included the audit of the recoverability of goodwill, the
audit of the group’s current and deferred income taxes, the
audit of group share-based payment schemes, the audit of the
defined benefit pension scheme and the audit of the group
consolidation.
• Audit coverage from full scope and specified procedures over
77% of group revenue.
• Full scope audit procedures performed over the company
financial information.
Key audit matters
• Completeness and accuracy of customer deduction accruals
(Group).
• Recoverability of goodwill in relation to the US Cash Generating
Unit (Group).
• Recoverability of Shares in Group undertakings and Loans to
Group undertakings (Company).
Materiality
• Overall group materiality: £4.0 million (2020: £3.8 million)
based on 5% of profit before tax on underlying activities (2020:
a three-year average of profit before tax on underlying
activities).
• Overall company materiality: £4.1 million (2020: £3.6 million)
based on 1% of net assets.
• Performance materiality: £3.0 million (2020: £2.9 million)
(Group) and £3.1 million (2020: £2.7 million) (Company).
The scope of our audit
As part of designing our audit, we determined materiality
and assessed the risks of material misstatement in the
financial statements.
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Key audit matters
Key audit matters are those matters that, in the auditors’ professional judgement, were of most significance in the audit of the
financial statements of the current period and include the most significant assessed risks of material misstatement (whether
or not due to fraud) identified by the auditors, including those which had the greatest effect on: the overall audit strategy; the
allocation of resources in the audit; and directing the efforts of the engagement team. These matters, and any comments we
make on the results of our procedures thereon, were addressed in the context of our audit of the financial statements as a
whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
This is not a complete list of all risks identified by our audit.
Recoverability of Shares in Group undertakings and Loans to Group undertakings (Company) is a new key audit matter this year.
Presentation and disclosure of exceptional items (Group) and The impact of COVID-19 (Group and Company), which were key
audit matters last year, are no longer included because there are no exceptional items presented in the current year, and the
impact of COVID-19 is considered to be reduced to a sufficiently low level. Otherwise, the key audit matters below are consistent
with last year.
Key audit matter How our audit addressed the key audit matter
Completeness and accuracy of customer deduction
accruals (Group)
Refer to the accounting policies in note 2 and the Key
sources of estimation uncertainty in note 3 of the
Consolidated Financial Statements.
At the planning stage of the audit, we assessed the design and implementation
of controls over the customer deduction process.
As described in notes 2 and 3 of the Consolidated
Financial Statements, revenue from the sale of goods
is measured net of deductions relating to commercial
incentive arrangements in the form of volume-related
rebates, marketing and promotional funding, discounts
or lump sum incentives (“customer deductions”), when
it is highly probable that they will not reverse.
We understood and assessed the group’s revenue recognition accounting policies,
including the recognition of customer deductions.
The complexity of customer deductions depends on the
specifics of each arrangement. Some arrangements
relating to specific products or promotions are simple
whereas other arrangements may cover multiple
manufacturing sites, multiple products or span period
ends. These are more complex and can require
estimation of the amount of deductions ultimately
claimed. Management judgement is required when
assessing if unclaimed historical deduction accruals
are no longer required.
We performed risk assessment analytics by reviewing the customer deductions as a
percentage of revenue by customer. We also performed gross margin analysis year
on year to identify any unusual or unexpected trends.
We performed a detailed risk assessment on each of our
in scope components to determine the inherent risk level
for the two key assertions of completeness and accuracy,
and tailored the extent of our audit procedures
accordingly. We deemed three components to contain a
significant risk over the accuracy and completeness of
customer deduction accruals because of the number
and variety of contractual arrangements and the
inherent uncertainty in future outcome. Of those three
components, two components also contained a
significant risk over the accuracy of a specific other sales
accrual given it’s inherent risk. Testing to address these
significant risk assertions was performed to a high level
of assurance. Management estimates the level of claims
from customers based on historical experience and the
specific terms of individual agreements. Key inputs into
these estimates include forecast sales volumes (where
agreements are not coterminous), estimated consumer
uptake (in relation to promotional funding) and ongoing
negotiations with customers.
We assessed the completeness and accuracy of amounts recognised in the income
statement and accrued at the period end:
FINANCIAL STATEMENTS
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CONTINUED
Key audit matter How our audit addressed the key audit matter
Refer to the Report of the Audit and Risk Committee
for discussion of this key audit matter.
• We obtained management’s schedule of customer deduction accruals which analyses
the opening accrual to closing accrual with reference to amounts claimed, amounts
accrued in the period and amounts released. We verified the mathematical accuracy
of the schedule;
• We retrospectively reviewed management’s historical accuracy of accruals recorded
in the previous year by comparison to the amounts subsequently settled during the
current year and challenged management if any amounts had not been adjusted. An
immaterial difference was identified and reported to the Audit and Risk Committee;
• For a sample of customer deductions recorded in the period, we agreed key inputs and
assumptions in the calculation to supporting documentation. This included third party
support such as subsequent settlement amounts, or where unsettled, contracts or
correspondence with the customer. Where relevant we verified the sales value or
volume to which underlying contract terms had been applied. We recalculated the
income statement and accrual amounts to test mathematical accuracy;
• We selected a sample of prior year accruals settled in the period by agreeing to debit
notes or payments made to the customer;
• We performed a review on aged balances released in the period to verify that they met
the Group’s accounting policy regarding passage of time; and
• In order to test for completeness we reviewed commercial agreements for undisclosed
volume rebates, promotional funding arrangements or marketing support. We
performed detailed testing to ensure that expected promotional accruals had been
recognised based on promotions seen in store or online. We compared information
obtained at site level with group level discussions. We performed substantive testing of
post year end payments and credit notes issued to ensure none related to unrecognised
deduction accruals. We reviewed local management’s debit note reconciliation to
ensure all related deduction accruals were correctly recognised.
We also assessed the adequacy of the disclosure provided in note 2 and note 3 of the
Consolidated Financial Statements in relation to the relevant accounting standards.
We found no material differences as a result of the audit procedures performed.
Recoverability of goodwill in relation to the US Cash
Generating Unit (Group)
Refer to the accounting policies in note 2, the Key sources
of estimation uncertainty in note 3 and note 13 of the
Consolidated Financial Statements.
At the planning stage of the audit, we assessed the design and implementation
of controls over the impairment review process.
Goodwill must be tested for impairment on at least an
annual basis. The determination of recoverable
amount, being the higher of value-in-use and fair value
less costs of disposal, requires estimations on the part
of management in both identifying and then valuing the
relevant group’s cash-generating units (“CGUs”).
As part of our audit of management’s impairment assessment and underlying
discounted cash flow model:
The CGU with the lowest level of headroom in the
impairment test was the US CGU. On 25 December
2021, the Group held goodwill of £46.3 million and
other assets of £64.0 million in relation to this CGU.
• We obtained the impairment model prepared by management. Management has
extended the term of the model to ten years in order to include the impact of climate
change, see below. We have tested the technical and arithmetic accuracy to ensure that it
had been prepared in line with the guidance provided in IAS 36;
We focused on this area as management judgement is
required to establish the recoverable amount using
value in use models. This includes judgement in the
selection of assumptions used to estimate forecast
future cash flows such as EBITDA growth, and in the
selection of appropriate discount and long-term
growth rates.
• We reviewed the climate related assumptions within the model. Our procedures
included, but were not limited to:
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Key audit matter How our audit addressed the key audit matter
Management has included climate related assumptions
within the model for the first time. Management has
engaged an expert, Willis Towers Watson (“WTW”) to
calculate estimated decarbonisation costs under a
number of modelled scenarios. The term of the model
has then been extended to ten years after which these
decarbonisation costs have been included, based on
management’s assessment of the most likely scenario.
An estimation of capital expenditure for climate related
matters has also been included within the model.
– Assessing the competence of management experts, WTW;
The key assumptions within the models are all
subjective and susceptible to management bias and
execution risk and could lead to an impairment charge
if incorrect.
Refer to the Report of the Audit and Risk Committee for
discussion of this key audit matter.
– Considering the decarbonisation scenario assumptions used by WTW to calculate
decarbonisation costs which include up to two degrees celsius climate change
scenario;
– Corroborating carbon pricing assumptions to an independent external source, the
International Energy Agency; and
– Performing sensitivity analysis using more challenging scenarios and increased
decarbonisation costs to test that the model is not sensitive to these assumptions.
• We used internal valuation experts to determine whether management’s discount rate
was within an acceptable range and concluded that it was appropriate;
• We used internal valuation experts to determine if long-term growth rates used in the
impairment model were consistent with external sources of evidence;
• We identified key cash flow forecast assumptions to which the model was sensitive and
focussed our efforts on these assumptions. We challenged the basis of the short-term
forecasts used in the model, focussing on growth plans in 2022. This included, but was
not limited to:
– agreeing forecasts to Board approved plans;
– reviewing management’s historical accuracy of forecasting;
– reviewing capital expenditure forecasts to Board approved plans. We challenged
management on capital expenditure which was expansionary in nature and
confirmed that appropriate central overlays had been included to remove associated
incremental EBITDA;
– assessing the revenue growth rates with reference to historical growth in the US
business, actual performance of the US CGU in 2021 and 2022 to date and versus key
customer growth plans;
– verifying forecast margins with reference to historical growth in the US business and
actual performance of the US CGU in 2021 and 2022 to date;
– agreeing 2022 volumes to third party evidence; and
– performing detailed testing to substantiate price increases.
We performed a cross check between the value-in-use calculation for the full
business to the market capitalisation of the company.
We reperformed management’s sensitivity analysis by reducing cash inflows through
constraining both revenue growth and EBITDA margin, and separately sensitised the
discount rate and long-term growth rates to understand the impact that possible
changes could have. We confirmed these are mathematically accurate.
We concluded that no impairment charge is required and based on the testing and
reasonable downside scenarios modelled, concurred with the disclosures included
in the financial statements.
Recoverability of Shares in Group undertakings and
Loans to Group undertakings (Company)
Refer to the accounting policies in note 2, note 5 and
note 6 of the Company Financial Statements.
To address the risk identified;
Bakkavor Group plc holds a direct undertaking in
Bakkavor Holdings Limited, and through this entity
an indirect investment in the group as a whole. The
valuation of the Shares in Group undertakings is
significant to the company only balance sheet. The
company also holds a loan to Group undertakings.
Given the magnitude of both the Shares in Group
undertakings and the Loans to Group undertakings we
have considered the risk of impairment of these assets.
• We obtained a schedule of Shares in Group undertakings and ensured this reconciled to
financial statements;
FINANCIAL STATEMENTS
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Key audit matter How our audit addressed the key audit matter
• We challenged management’s assertion that no impairment triggers were identified
that would necessitate a full impairment review to be performed. We performed a
review of net assets of the subsidiary entity against the carrying value, considered the
external market and economic factors and also our review of the discounted cash flow
models prepared for the purpose of testing goodwill for impairment. (Please see our
Key Audit Matter in respect of the Recoverability of goodwill in relation to the US Cash
Generating Unit). Based on these procedures we concluded that there were no triggers
that would indicate the directors were required to perform a full impairment test of the
Shares in Group undertakings carrying value;
• We have performed a reconciliation of the Loans to Group undertakings and ensured
this agrees with the counterparty;
• We reviewed the application of management’s impairment methodology in assessing
the recoverability of intercompany receivables and the level of related expected credit
loss provisions. The outstanding balances are considered to have a low credit risk and
therefore the associated loss allowance is limited to 12 months’ expected losses. We
have reviewed Loan to Group undertakings terms and assessed the nature of the
counterparty’s liquid assets and have concluded that there is no indication of material
impairment to the receivable balances; and
• We also assessed the adequacy of the disclosure provided in note 2, note 5 and note 6
of the Company Financial Statements in relation to the relevant accounting standards.
We found no exceptions as a result of our testing and consider the Recoverability of
Shares in Group undertakings and Loans to Group undertakings to be appropriate.
How we tailored the audit scope
We tailored the scope of our audit to ensure that we performed
enough work to be able to give an opinion on the financial
statements as a whole, taking into account the structure
of the group and the company, the accounting processes
and controls, and the industry in which they operate.
The group is structured according to manufacturing sites,
each of which is a component and which maintains separate
accounting records and controls. The group financial
statements is a consolidation of reporting units, comprising
the manufacturing sites and centralised functions.
In establishing the overall approach to the group audit, we
determined the type of work that needed to be performed at
each reporting component. Two reporting components were
determined to be financially significant due to their relative
contribution to profit before tax on underlying activities or
revenue. Full scope audit procedures were performed over
these components. No reporting components were
determined to be significant based on their risk profile.
We identified a further six UK components which, in our view,
required a full audit of their complete financial information
in order to ensure that sufficient appropriate audit evidence
was obtained. We also identified certain large or material
balances in other components where specified procedures
were performed. These included multiple balances within
the US component, cash balances within the Chinese sub-
consolidation and a UK holding company, accounts payable
and inventory within the Inbound Logistics component,
tangible fixed assets and provisions within two central property
components, external borrowings and related interest
expenses within the finance component to which specific audit
procedures were performed to ensure that we had sufficient
audit coverage over the relevant financial statement line items.
The group consolidation, financial statement disclosures and
a number of centralised functions were audited by the group
audit team. These included the audit of the recoverability of
goodwill, investments and intercompany debtors, the audit of
the group’s current and deferred income taxes, the audit of
group share-based payment schemes and the audit of the
defined benefit pension scheme.
We also performed group level analytical procedures on all
of the remaining out of scope components to identify whether
any further audit evidence was needed. This resulted in no
additional substantive testing.
This audit work resulted in coverage over 77% of group
revenues.
The company was also subject to a full scope audit by the
group audit team.
Materiality
The scope of our audit was influenced by our application
of materiality. We set certain quantitative thresholds for
materiality. These, together with qualitative considerations,
helped us to determine the scope of our audit and the nature,
timing and extent of our audit procedures on the individual
financial statement line items and disclosures and in
evaluating the effect of misstatements, both individually
and in aggregate on the financial statements as a whole.
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Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:
Financial statements – Group Financial statements – Company
Overall materiality £4.0 million (2020: £3.8 million). £4.1 million (2020: £3.6 million).
How we determined it 5% of profit before tax on underlying activities (2020: a
three-year average of profit before tax on underlying activities).
1% of net assets.
Rationale for benchmark
applied
Based on the benchmarks used in the Annual Report, profit
before tax on underlying activities is a key measure used by the
shareholders in assessing the performance of the group and is a
generally accepted auditing benchmark. We have changed our
materiality benchmark from a three year average of underlying
profit before tax to in year underlying profit before tax as we
consider this is the most relevant measure of the ongoing
performance of the Group. We previously used the three year
average as a benchmark as a result of the impact of fluctuating
business performance due to US start up losses and COVID-19.
We believe that net assets is an appropriate
benchmark for a non-trading holding company.
For each component in the scope of our group audit, we
allocated a materiality that is less than our overall group
materiality. The range of materiality allocated across
components was between £0.9 million and £2.3 million.
We use performance materiality to reduce to an appropriately
low level the probability that the aggregate of uncorrected
and undetected misstatements exceeds overall materiality.
Specifically, we use performance materiality in determining
the scope of our audit and the nature and extent of our testing
of account balances, classes of transactions and disclosures,
for example in determining sample sizes. Our performance
materiality was 75% (2020: 75%) of overall materiality,
amounting to £3.0 million (2020: £2.9 million) for the group
financial statements and £3.1 million (2020: £2.7 million)
for the company financial statements.
In determining the performance materiality, we considered
a number of factors – the history of misstatements, risk
assessment and aggregation risk and the effectiveness of
controls – and concluded that an amount at the upper end
of our normal range was appropriate.
We agreed with the Audit and Risk Committee that we would
report to them misstatements identified during our audit
above £0.2 million (group audit) (2020: £0.2 million) and
£0.2 million (company audit) (2020: £0.2 million) as well as
misstatements below those amounts that, in our view,
warranted reporting for qualitative reasons.
CONCLUSIONS RELATING TO GOING CONCERN
Our evaluation of the directors’ assessment of the group’s
and the company’s ability to continue to adopt the going
concern basis of accounting included:
• We obtained management’s paper that supports the Board’s
assessment and conclusions with respect to the disclosures
provided around going concern and viability;
• We discussed with management the assumptions applied
in the going concern review so we could understand and
challenge the rationale for those assumptions, using our
knowledge of the business, the sector and wider commentary
available from key customers. We verified key assumptions
to supporting documentation;
• We reviewed monthly trading results to January 2022, and weekly
trading results thereafter for 2022 and compared to management’s
original budget and revised forecasts, and considered the impact of
these actual results on the future forecast period; and
• We reviewed management’s severe but plausible downside
sensitivity scenarios. We assessed the availability of liquid
resources under the base case and downside scenario
modelled by management, and the associated covenant tests
applied. We reviewed management’s identified mitigating
actions to confirm they are within management’s control,
albeit we note that no significant mitigations are required.
Based on the work we have performed, we have not identified
any material uncertainties relating to events or conditions
that, individually or collectively, may cast significant doubt on
the group’s and the company’s ability to continue as a going
concern for a period of at least twelve months from when the
financial statements are authorised for issue.
In auditing the financial statements, we have concluded that
the directors’ use of the going concern basis of accounting in
the preparation of the financial statements is appropriate.
However, because not all future events or conditions can be
predicted, this conclusion is not a guarantee as to the group’s
and the company’s ability to continue as a going concern.
In relation to the directors’ reporting on how they have applied
the UK Corporate Governance Code, we have nothing material
to add or draw attention to in relation to the directors’
statement in the financial statements about whether the
directors considered it appropriate to adopt the going concern
basis of accounting.
Our responsibilities and the responsibilities of the directors
with respect to going concern are described in the relevant
sections of this report.
REPORTING ON OTHER INFORMATION
The other information comprises all of the information in the
Annual Report other than the financial statements and our
auditors’ report thereon. The directors are responsible for
the other information, which includes reporting based on the
Task Force on Climate-related Financial Disclosures (“TCFD”)
recommendations. Our opinion on the financial statements
does not cover the other information and, accordingly, we do
not express an audit opinion or, except to the extent otherwise
explicitly stated in this report, any form of assurance thereon.
In connection with our audit of the financial statements, our
responsibility is to read the other information and, in doing
so, consider whether the other information is materially
inconsistent with the financial statements or our knowledge
obtained in the audit, or otherwise appears to be materially
FINANCIAL STATEMENTS
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INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF BAKKAVOR GROUP PLC
CONTINUED
misstated. If we identify an apparent material inconsistency or
material misstatement, we are required to perform procedures
to conclude whether there is a material misstatement of the
financial statements or a material misstatement of the other
information. If, based on the work we have performed, we
conclude that there is a material misstatement of this other
information, we are required to report that fact. We have
nothing to report based on these responsibilities.
With respect to the Strategic Report and Directors’ Report,
we also considered whether the disclosures required by the
UK Companies Act 2006 have been included.
Based on our work undertaken in the course of the audit,
the Companies Act 2006 requires us also to report certain
opinions and matters as described below.
Strategic Report and Directors’ Report
In our opinion, based on the work undertaken in the course
of the audit, the information given in the Strategic Report and
Directors’ Report for the period ended 25 December 2021 is
consistent with the financial statements and has been
prepared in accordance with applicable legal requirements.
In light of the knowledge and understanding of the group and
company and their environment obtained in the course of the
audit, we did not identify any material misstatements in the
Strategic Report and Directors’ Report.
Directors’ Remuneration
In our opinion, the part of the Directors’ Remuneration Report
to be audited has been properly prepared in accordance with
the Companies Act 2006.
CORPORATE GOVERNANCE STATEMENT
The Listing Rules require us to review the directors’
statements in relation to going concern, longer-term viability
and that part of the corporate governance statement relating
to the company’s compliance with the provisions of the UK
Corporate Governance Code specified for our review. Our
additional responsibilities with respect to the corporate
governance statement as other information are described in
the Reporting on other information section of this report.
Based on the work undertaken as part of our audit, we have
concluded that each of the following elements of the corporate
governance statement, included within the Governance
section is materially consistent with the financial statements
and our knowledge obtained during the audit, and we have
nothing material to add or draw attention to in relation to:
• The directors’ confirmation that they have carried out a robust
assessment of the emerging and principal risks;
• The disclosures in the Annual Report that describe those
principal risks, what procedures are in place to identify
emerging risks and an explanation of how these are being
managed or mitigated;
• The directors’ statement in the financial statements about
whether they considered it appropriate to adopt the going concern
basis of accounting in preparing them, and their identification of
any material uncertainties to the group’s and company’s ability
to continue to do so over a period of at least twelve months from
the date of approval of the financial statements;
• The directors’ explanation as to their assessment of the group’s
and company’s prospects, the period this assessment covers
and why the period is appropriate; and
• The directors’ statement as to whether they have a reasonable
expectation that the company will be able to continue in
operation and meet its liabilities as they fall due over the period
of its assessment, including any related disclosures drawing
attention to any necessary qualifications or assumptions.
Our review of the directors’ statement regarding the longer-term
viability of the group was substantially less in scope than an audit
and only consisted of making inquiries and considering the
directors’ process supporting their statement; checking that
the statement is in alignment with the relevant provisions of the
UK Corporate Governance Code; and considering whether the
statement is consistent with the financial statements and our
knowledge and understanding of the group and company and
their environment obtained in the course of the audit.
In addition, based on the work undertaken as part of our audit,
we have concluded that each of the following elements of the
corporate governance statement is materially consistent with
the financial statements and our knowledge obtained during
the audit:
• The directors’ statement that they consider the Annual Report,
taken as a whole, is fair, balanced and understandable, and
provides the information necessary for the members to assess
the group’s and company’s position, performance, business
model and strategy;
• The section of the Annual Report that describes the review of
effectiveness of risk management and internal control systems;
and
• The section of the Annual Report describing the work of the
Audit and Risk Committee.
We have nothing to report in respect of our responsibility to
report when the directors’ statement relating to the
company’s compliance with the Code does not properly
disclose a departure from a relevant provision of the Code
specified under the Listing Rules for review by the auditors.
RESPONSIBILITIES FOR THE FINANCIAL STATEMENTS
AND THE AUDIT
Responsibilities of the directors for the financial statements
As explained more fully in the Statement of Directors’
Responsibilities in Respect of the Financial Statements, the
directors are responsible for the preparation of the financial
statements in accordance with the applicable framework and
for being satisfied that they give a true and fair view. The
directors are also responsible for such internal control as they
determine is necessary to enable the preparation of financial
statements that are free from material misstatement, whether
due to fraud or error.
In preparing the financial statements, the directors are
responsible for assessing the group’s and the company’s
ability to continue as a going concern, disclosing, as
applicable, matters related to going concern and using the
going concern basis of accounting unless the directors either
intend to liquidate the group or the company or to cease
operations, or have no realistic alternative but to do so.
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Auditors’ responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether
the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an
auditors’ report that includes our opinion. Reasonable assurance
is a high level of assurance, but is not a guarantee that an
audit conducted in accordance with ISAs (UK) will always
detect a material misstatement when it exists. Misstatements
can arise from fraud or error and are considered material if,
individually or in the aggregate, they could reasonably be
expected to influence the economic decisions of users taken
on the basis of these financial statements.
Irregularities, including fraud, are instances of non-
compliance with laws and regulations. We design procedures
in line with our responsibilities, outlined above, to detect
material misstatements in respect of irregularities, including
fraud. The extent to which our procedures are capable of
detecting irregularities, including fraud, is detailed below.
Based on our understanding of the group and industry, we
identified that the principal risks of non-compliance with laws
and regulations related to the Listing Rules, Pensions
legislation, Tax legislation, Employment regulation, Health and
Safety legislation and other legislation specific to the industry in
which the group operates (including Food Safety legislation),
and we considered the extent to which non-compliance might
have a material effect on the financial statements. We also
considered those laws and regulations that have a direct impact
on the financial statements such as Companies Act 2006. We
evaluated management’s incentives and opportunities for
fraudulent manipulation of the financial statements (including
the risk of override of controls), and determined that the
principal risks were related to posting inappropriate journal
entries to increase revenue and management bias in
accounting estimates. Audit procedures performed by the
engagement team included:
• Discussions with management, internal audit and the group’s
legal counsel, including consideration of known or suspected
instances of non-compliance with laws and regulation and fraud;
• Evaluation of management’s controls designed to prevent and
detect irregularities;
• Assessment of matters reported on the group’s
whistleblowing helpline, and the results of management’s
investigation of such matters;
• Review of minutes of meetings of those charged with governance;
• Review of internal audit reports;
• Review of key correspondence with regulatory authorities;
• Challenging assumptions and judgements made by
management in their significant accounting estimates, in
particular in relation to calculation of customer deduction
accruals and the recoverability assessment for goodwill (see
related key audit matters); and
• Identifying and testing journal entries, in particular any journal
entries posted with unusual account combinations which
impact revenue, which could manipulate the financial
performance of the business.
There are inherent limitations in the audit procedures
described above. We are less likely to become aware of
instances of non-compliance with laws and regulations that
are not closely related to events and transactions reflected
in the financial statements. Also, the risk of not detecting a
material misstatement due to fraud is higher than the risk of
not detecting one resulting from error, as fraud may involve
deliberate concealment by, for example, forgery or intentional
misrepresentations, or through collusion.
Our audit testing might include testing complete populations of
certain transactions and balances, possibly using data auditing
techniques. However, it typically involves selecting a limited
number of items for testing, rather than testing complete
populations. We will often seek to target particular items for
testing based on their size or risk characteristics. In other cases,
we will use audit sampling to enable us to draw a conclusion
about the population from which the sample is selected.
A further description of our responsibilities for the audit of the
financial statements is located on the FRC’s website at:
www.frc.org.uk/auditorsresponsibilities. This description
forms part of our auditors’ report.
Use of this report
This report, including the opinions, has been prepared for and
only for the company’s members as a body in accordance with
Chapter 3 of Part 16 of the Companies Act 2006 and for no other
purpose. We do not, in giving these opinions, accept or assume
responsibility for any other purpose or to any other person to
whom this report is shown or into whose hands it may come
save where expressly agreed by our prior consent in writing.
OTHER REQUIRED REPORTING
Companies Act 2006 exception reporting
Under the Companies Act 2006 we are required to report to
you if, in our opinion:
• we have not obtained all the information and explanations we
require for our audit; or
• adequate accounting records have not been kept by the
company, or returns adequate for our audit have not been
received from branches not visited by us; or
• certain disclosures of directors’ remuneration specified by law
are not made; or
• the company financial statements and the part of the Directors’
Remuneration Report to be audited are not in agreement with
the accounting records and returns.
We have no exceptions to report arising from this responsibility.
Appointment
Following the recommendation of the Audit and Risk
Committee, we were appointed by the members on 23 May
2019 to audit the financial statements for the year ended 28
December 2019 and subsequent financial periods. The period
of total uninterrupted engagement is 3 years, covering the
years ended 28 December 2019 to 25 December 2021.
Sandeep Dhillon (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
London
7 March 2022
FINANCIAL STATEMENTS
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CONSOLIDATED INCOME STATEMENT
52 WEEKS ENDED 25 DECEMBER 2021
52 weeks ended 25 December 2021 52 weeks ended 26 December 2020
£ million Note(s)
Underlying
activities
Exceptional
items
1
Total
Underlying
activities
Exceptional
items
1
Total
Continuing operations
Revenue 4,5 1,871.6 – 1, 87 1. 6 1,793.5 – 1, 79 3 . 5
Cost of sales (1,330.9) – (1, 3 3 0 .9 ) (1,279.4) – (1, 2 79 . 4 )
Gross prot 540.7 – 54 0.7 514.1 – 514 .1
Distribution costs (75.1) – (7 5 .1 ) (70.5) – (70 . 5 )
Other administrative costs (net) 6 (363.9) – (363. 9 ) (360.1) (21.6) (3 81. 7 )
Share of results of associates after tax 17 0.3 – 0.3 0.1 – 0 .1
Operating prot/(loss) 102.0 – 102 . 0 83.6 (21.6) 62. 0
Finance costs 9 (17.1) – (17. 1 ) (19.3) (1.7) (21. 0 )
Other gains and (losses) 10 (3.5) – (3.5 ) 3.2 – 3.2
Prot/(loss) before tax 6 81.4 – 8 1.4 67. 5 (23.3) 44. 2
Tax (charge)/credit 11 (24.6) – (24 .6 ) (14.5) 4.4 (1 0 .1 )
Prot/(loss) for the period 56.8 – 56. 8 53.0 (18.9) 3 4 .1
Earnings per share
Basic 12 9. 8 p 5.9 p
Diluted 12 9.6 p 5.8 p
1 The Group presents its income statement with three columns. The Directors consider that the underlying activities are more representative of the ongoing operations and key metrics of the Group. Details
of exceptional items can be found in Note 7 and include material items that are non-recurring, signicant in nature and are important to users in understanding the business, including restructuring costs,
accelerated amortisation of nancing fees and impairment of assets. In addition, the Group uses further Alternative Performance Measures which can be found in Note 36.
The Notes to the Financial Statements form an integral part of the Consolidated Financial Statements.
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CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
52 WEEKS ENDED 25 DECEMBER 2021
£ million Note
52 weeks ended 25
December 2021
52 weeks ended 26
December 2020
Prot for the period 56. 8 3 4 .1
Other comprehensive income/(expense)
Items that will not be reclassied subsequently to prot or loss:
Actuarial gain on dened benet pension schemes 32 24. 5 0.4
Tax relating to components of other comprehensive income 11 (6 .6 ) (0 .1 )
Items that may be reclassied subsequently to prot or loss:
Exchange dierences on translation of foreign operations 2.6 (2.6 )
Gain/(loss) on cash ow hedges 2.0 (1. 1 )
Hedging gains reclassied to prot or loss 0.4 0.2
Tax relating to components of other comprehensive (expense)/income 11 (0 .2 ) 0.2
Total other comprehensive income/(expense) 22.7 (3 .0 )
Total comprehensive income 79. 5 3 1.1
The Notes to the Financial Statements form an integral part of the Consolidated Financial Statements.
FINANCIAL STATEMENTS
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CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 25 DECEMBER 2021
£ million Note 25 December 2021 26 December 2020
Non-current assets
Goodwill 13 6 5 0 .1 6 49. 6
Other intangible assets 14 1. 7 2.2
Property, plant and equipment 15 545. 2 535 . 3
Interests in associates and other investments 17 11 . 8 12 . 2
Deferred tax asset 23 9.9 13 . 0
Retirement benet asset 32 3 7. 2 11. 2
Derivative nancial instruments 22 2.6 –
Current assets
Inventories 18 70. 8 63.8
Trade and other receivables 19 14 2 . 8 13 6 . 4
Cash and cash equivalents 20 31.1 24. 8
Current tax asset – 0 .1
Derivative nancial instruments 22 0.3 0.6
Total assets 1, 5 0 3 . 5 1, 4 4 9. 2
Current liabilities
Trade and other payables 25 (39 0. 8 ) (3 6 7. 6 )
Current tax liabilities (1. 3 ) –
Borrowings 21 (3 .0 ) (23. 2 )
Lease liabilities 24 (10 . 8 ) (11 . 1 )
Provisions 26 (8. 5 ) (11 . 0 )
Derivative nancial instruments 22 (1. 7 ) (0.9 )
(416 .1 ) (413 . 8 )
Non-current liabilities
Borrowings 21 (3 1 7. 6 ) (331 .4 )
Lease liabilities 24 (73. 8 ) (70. 9 )
Provisions 26 (14 . 3 ) (14 . 4 )
Derivative nancial instruments 22 (0. 4 ) (0.9 )
Deferred tax liabilities 23 (4 0. 6 ) (19. 7 )
(4 4 6 .7 ) (4 3 7. 3 )
Total liabilities (862 . 8 ) (8 5 1.1 )
Net assets 64 0.7 5 9 8 .1
Equity
Called up share capital 28 11 . 6 11 . 6
Merger reserve 28 (13 0 . 9 ) (13 0 . 9 )
Hedging reserve 28 1. 7 (0 .7 )
Translation reserve 28 2 7. 2 24 . 8
Retained earnings 7 31.1 693. 3
Total equity 64 0.7 5 9 8 .1
The Financial Statements of Bakkavor Group plc and the accompanying Notes, which form an integral part of the Consolidated Financial
Statements, were approved by the Board of Directors on 7 March 2022. They were signed on behalf of the Board of Directors by:
Agust Gudmundsson Ben Waldron
Chief Executive Ocer Chief Financial Ocer
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CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
52 WEEKS ENDED 25 DECEMBER 2021
£ million Note
Called up share
capital
Merger
reserve Hedging reserve
Translation
reserve
Retained
earnings
Total
equity
Balance at 29 December 2019 11 . 6 (13 0 .9 ) – 2 7. 2 6 5 7. 8 565.7
Prot for the period – – – – 3 4 .1 3 4 .1
Other comprehensive (expense)/income for the period – – (0.7 ) (2.6 ) 0. 3 (3. 0 )
Total comprehensive (expense)/income for the period – – (0.7 ) (2.6 ) 34.4 31.1
Credit for share-based payments 31 – – – – 1. 2 1. 2
Deferred tax 11 – – – 0.2 (0 . 1 ) 0 .1
Balance at 26 December 2020 11 . 6 (13 0 .9 ) (0.7 ) 24. 8 693. 3 5 9 8 .1
Prot for the period – – – – 56.8 56. 8
Other comprehensive income for the period – – 2.2 2.6 17. 9 22.7
Total comprehensive income for the period – – 2.2 2.6 74 . 7 79. 5
Reclassication – – 0. 2 (0. 2 ) – –
Dividends 28 – – – – (38. 5 ) (38 . 5 )
Credit for share-based payments 31 – – – – 2. 3 2.3
Cash-settlement of share based payments 31 – – – – (0. 6 ) (0. 6 )
Deferred tax 11 – – – – (0 .1 ) (0 .1 )
Balance at 25 December 2021 11 . 6 (13 0 .9 ) 1. 7 2 7. 2 7 31 .1 64 0.7
The Notes to the Financial Statements form an integral part of the Consolidated Financial Statements.
FINANCIAL STATEMENTS
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CONSOLIDATED STATEMENT OF CASH FLOWS
52 WEEKS ENDED 25 DECEMBER 2021
£ million Note
52 weeks ended 25
December 2021
52 weeks ended 26
December 2020
Net cash generated from operating activities 29 14 4 . 0 88.5
Investing activities:
Dividends received from associates 17 0.7 0 .1
Purchases of property, plant and equipment (59. 8 ) (56 .4 )
Proceeds on disposal of property, plant and equipment 4.2 0 .1
Net cash used in investing activities (54 .9 ) (5 6. 2 )
Financing activities:
Dividends paid 28 (38 . 5 ) –
Increase in borrowings 2 8 .1 3 3 4 .1
Repayment of borrowings (60 .9 ) (355.9 )
Principal elements of lease payments 24 (11 . 7 ) (11 . 4 )
Net cash used in nancing activities (83. 0 ) (33. 2 )
Net increase/(decrease) in cash and cash equivalents 6 .1 (0 .9 )
Cash and cash equivalents at beginning of period 24. 8 2 5.9
Eect of foreign exchange rate changes 0.2 (0 . 2 )
Cash and cash equivalents at end of period 31.1 24. 8
The Notes to the Financial Statements form an integral part of the Consolidated Financial Statements.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
52 WEEKS ENDED 25 DECEMBER 2021
1. GENERAL INFORMATION
number: 10986940, registered office: Fitzroy Place, 5th Floor, 8 Mortimer Street, London, England , W1T 3JJ)
Ordinary shares are traded on the London Stock Exchange.
At the date of authorisation of these Financial Statements, the following Standards and Interpretations relevant to the Group
which have not been applied in these Financial Statements were in issue but not yet effective:
IFRS 17 Insurance Contracts
Amendments to IFRS 16 COVID-19 Related Rent Concessions beyond 30 June 2021
Amendments to IAS 1 Presentation of financial statements on classification of liabilities
Annual Improvements to IFRS Standards 2018-2020 Cycle
Narrow scope amendments to IFRS 3, IAS 16 and IAS 37
Narrow scope amendments to IAS 1, IAS 8 and IFRS Practice statement 2
The Directors anticipate that the adoption of these Standards and Interpretations will have no material impact on the Financial
Statements of the Group.
The Group has elected to early adopt amendments to IFRS 9, IAS 39, IFRS 7 – Interest Rate Benchmark Reform Phase 2 and
IFRS 16 – COVID-19 Related Rent Concessions as issued in August 2020. In accordance with the transition provisions, the
amendments have been adopted retrospectively to hedging relationships and financial instruments. Comparative amounts have
not been restated, and there was no impact on the current period opening reserves amounts on adoption.
Effect of IBOR reform
During the period SONIA (Sterling Overnight Index Average) replaced GBP LIBOR. GBP LIBOR is a ‘term rate’, which means that
it is published for a borrowing period (such as three months or six months) and is ‘forward looking’, because it is published at
the beginning of the borrowing period. SONIA is a ‘backward-looking’ rate, based on overnight rates from actual transactions,
and it is published at the end of the overnight borrowing period. Furthermore, LIBOR includes a credit spread over the risk-free
rate, which SONIA does not.
The Group completed its GBP LIBOR transition project during September of 2021. As part of the transition the Group has applied
a credit spread adjustment to SONIA to determine the term-rate applicable to the Group going forward. This transition impacted
the Group’s floating-rate borrowings (detailed in Note 21) and interest rate swaps (detailed in Note 27). As at 25 December 2021
there were no financial instruments, that previously referenced GBP LIBOR, that had not been transitioned to SONIA. None of
the financial instruments impacted by this change were derecognised because of adopting SONIA, due to benchmark reform,
described below.
Amendments to IFRS 9 and IFRS 7 – Interest Rate Benchmark Reform – Phase 1, which became effective for periods
commencing on or after 1 January 2020, were early adopted by the Group in the prior period.
Hedge relationships
The ‘Phase 2’ amendments address issues arising during interest rate benchmark reform, including specifying when the
‘Phase 1’ amendments will cease to apply, when hedge designations and documentation should be updated, and when hedges
of the alternative benchmark rate of the hedged risk are permitted.
The ‘Phase 1’ amendments provided temporary relief from applying specific hedge accounting requirements to hedging
relationships directly affected by IBOR reform. The reliefs had the effect that IBOR reform should not generally cause hedge
accounting to terminate prior to contracts being amended. However, any hedge ineffectiveness continued to be recorded in the
consolidated income statement. Furthermore, the amendments set out triggers for when the reliefs would end, which included
the uncertainty arising from interest rate benchmark reform no longer being present.
FINANCIAL STATEMENTS
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
For the year ended 25 December 2021, the Group has adopted the following hedge accounting reliefs provided by ‘Phase 2’
of the amendments:
• Hedge designation: When the Phase 1 amendments ceased to apply, the Group amended its hedge designation to reflect changes
which are required by IBOR reform by:
– designating an alternative benchmark rate (contractually or non-contractually specified) as a hedged risk;
– amending the description of the hedged item, including the description of the designated portion of the cash flows or fair value
being hedged; or
– amending the description of the hedging instrument.
These amendments to the hedge documentation do not require the Group to discontinue its hedge relationships.
• Amounts accumulated in the cash flow hedge reserve: When the Group amended its hedge designation, as described above,
the accumulated amount outstanding in the cash flow hedge reserve was deemed to be based on the alternative benchmark
rate, SONIA.
2. SIGNIFICANT ACCOUNTING POLICIES
Basis of accounting
The Financial Statements have been prepared in accordance with international accounting standards in conformity with the
requirements of the Companies Act 2006 and international financial reporting standards adopted pursuant to Regulation (EC)
No 1606/2002 as it applies in the European Union. Where the fiscal year 2021 is quoted in these Financial Statements this
relates to the 52-week period ended 25 December 2021. The fiscal year 2020 relates to the 52-week period ended 26 December
2020. The Consolidated Financial Statements comprise the Financial Statements of the parent undertaking and its subsidiary
undertakings (the “Group”), together with the Group’s share of the results of associated undertakings comprising a 52 or
53-week period ending on the Saturday of or immediately before 31 December.
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 Group considers the impact of climate-related factors in the preparation of the Financial Statements and discloses any
material impact in the relevant Notes.
The Financial Statements have been prepared on the historical cost basis, except for the revaluation of financial instruments
and retirement benefit plan assets (which are stated at fair value).
The principal accounting policies adopted are set out below and have been applied consistently except that the Group now
applies hedge accounting for certain derivatives as set out below.
Going concern
The Directors have reviewed the historical trading performance of the Group and the forecasts through to March 2023.
The Directors, in their detailed consideration of going concern, have reviewed the Group’s future revenue projections and cash
requirements, which they believe are based on prudent interpretations of market data and past experience. The Directors have
also considered the Group’s level of available liquidity under its financing facilities. The Directors have carried out a robust
assessment of the significant risks currently facing the Group. This has included scenario planning on the implications of further
inflation and continuing labour availability issues. The Group has also modelled the potential impact of lower sales volumes
from further COVID restrictions, supply chain issues and reduced consumer demand in response to increasing retail prices.
Having taken these factors into account, under either scenario, the Directors consider that adequate headroom is available
based on the forecasted cash requirements of the business. 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 in the future.
Consequently, the Directors consider that the Company and the Group have adequate resources to meet their liabilities as
they fall due for the foreseeable future. For this reason, they continue to adopt the going concern basis in preparing the
Financial Statements.
Subsidiaries
Subsidiary undertakings are included in the Consolidated 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 has 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.
1. GENERAL INFORMATION CONTINUED
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When the Group 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 Group.
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 that qualify as measurement period
adjustments are adjusted retrospectively, with corresponding adjustments against goodwill. The subsequent accounting for
changes in fair value of the contingent consideration that do not qualify as measurement period adjustments depends on how
the contingent consideration is classified. Contingent consideration that is classified as equity is not remeasured at subsequent
reporting dates. Contingent consideration that is classified as an asset or a liability is remeasured at subsequent reporting
dates in accordance with IAS 39 or IAS 37, as appropriate.
Where a business combination is achieved in stages, the Group’s previously-held interests in the acquired entity are
remeasured 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 ‘Business combinations’.
Goodwill is assumed to have an indefinite life as the acquired business is expected to trade for the foreseeable future and
therefore 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 ‘Investments in associates’ below.
FINANCIAL STATEMENTS
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
Investments in associates
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.
Revenue recognition
The Group sells fresh prepared foods and fresh produce, and revenue is recognised as the performance obligation to deliver
goods to customers is satisfied and is recorded based on the amount of consideration expected to be received in exchange for
satisfying the performance obligation. Revenue on the sale of goods is recognised when control of the goods has passed to the
buyer upon delivery to the customer and represents the value of sales to customers net of customer deductions and discounts,
VAT and other sales-related taxes. Many of the Group’s revenue contracts include an element of variable consideration, such as
customer deductions for rebate arrangements or other incentives to customers. The arrangements can take the form of volume
rebates, marketing fund contributions or promotional fund contributions. The Group recognises revenue net of customer
deductions and discounts in the period in which the arrangement applies only when it is highly probable a significant reversal
in the cumulative amount of revenue will not occur. Volume based rebates are calculated on the Group’s estimate of rebates
expected to be paid to customers using the ‘most likely amount’ in line with IFRS 15 requirements, whereas fixed rebates are
accounted for as a reduction in revenue over the life of the contract. When the Group has satisfied its performance obligations,
the customer will make payment in line with agreed payment terms. The Group does not expect to have any contracts where
the period between transfer of the promised goods to the customer and payment by the customer exceeds one year. As a
consequence, the Group does not adjust any of the transaction price for the time value of money. For goods returned, the
Group will recognise an obligation and reduce revenue accordingly at the time of notification.
Customer deductions
Consistent with standard industry practice, the Group has arrangements with its customers providing volume-related rebates,
marketing and promotional funding contributions, discounts or lump sum incentives. These costs are recognised as a reduction
to revenue, as they are considered to be an adjustment to the selling price for the Group’s products. Sometimes the payment
of this support is subject to the Group’s customers performing specified actions or satisfying certain performance conditions
associated with the purchase of products from the Group. These include achieving agreed purchase volume targets and
providing promotional marketing materials/activities. Whilst there is no standard definition, these amounts payable to
customers are generally termed as ‘customer deductions’.
The Group recognises these costs as a deduction from revenue based upon the terms of the relevant arrangement in place.
Amounts payable relating to customer deduction arrangements are recognised within accruals except in cases where the
Group has a legal right of set-off and intends to offset against amounts due from that customer.
Leases
From the start of 2019 the Group adopted IFRS 16 Leases and transitioned to this standard by applying the modified
retrospective asset equals liability approach for lease commitments in place at that time.
IFRS 16 determines whether a contract contains a lease on the basis of whether the customer has the right to control the use of
an identified asset for a period of time in exchange for consideration. The Group has applied the definition of a lease and related
guidance set out in IFRS 16 to all lease contracts entered into or modified on or after 30 December 2018.
Under IFRS 16, all leases (except as noted below), are accounted for as follows:
• Recognise the right-of-use assets and lease liabilities in the consolidated statement of financial position, initially measured at the
present value of future lease payments. Future lease payments are discounted at the Group’s weighted average incremental
borrowing rate;
• Use the lease term specified in the contract. Where there are termination options in the contract it is assumed that these will
not be exercised and when there are extension options the Group assumes that these will be exercised; and
• Recognise depreciation of right-of-use assets and interest on lease liabilities in the consolidated income statement.
2. SIGNIFICANT ACCOUNTING POLICIES CONTINUED
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Lease incentives (e.g. rent-free period) are recognised as part of the measurement of the right-of-use assets and lease
liabilities, whereas under IAS 17 they resulted in the recognition of a lease incentive liability, amortised as a reduction of
rental expense on a straight-line basis.
Under IFRS 16, right-of-use assets are tested for impairment in accordance with IAS 36 Impairment of Assets and any
impairment is provided for by writing down the asset value.
For short-term leases (lease term of 12 months or less) and leases of low-value assets (such as personal computers and office
furniture), the Group has opted to recognise a lease expense on a straight-line basis over the lease term as permitted by IFRS
16 paragraph 6. This expense is presented within other expenses in the consolidated income statement.
In the statement of cash flows, the Group as a lessee will classify:
• Cash payments for the principal portion of the lease liability within financing activities;
• Cash payments for the interest portion of the lease liability, applying the requirements in IAS 7 Statement of Cash Flows for interest
paid; and
• Short-term lease payments, payments for leases of low-value assets and variable lease payments not included in the measurement
of the lease liability within operating activities.
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 on 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.
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 dates 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 and updated
products. Expenditure on research and development, where development costs do not meet the recognition criteria of IAS 38,
is recognised as an expense in the period in which it is incurred.
Exceptional items
Exceptional items are those that, in management’s judgement, should be disclosed by virtue of their nature or amount. Exceptional
items will typically include material items that are non-recurring, significant in nature and are important to users in understanding
the business, including restructuring costs, accelerated amortisation of financing fees and impairment of assets.
Operating profit
Operating profit is stated after charging exceptional items, impairment of assets, profit/loss on the disposal of subsidiaries and
associates and share of results of associates, but before investment revenue, finance costs and other gains and losses.
FINANCIAL STATEMENTS
165
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
Retirement benefit obligations
Defined contribution pension 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. Remeasurement, comprising actuarial gains and
losses, the effect of changes to the asset ceiling (if applicable) and the return on plan assets (excluding interest), are recognised
outside of the income statement and presented in the statement of comprehensive income.
Defined benefit costs are categorised as follows:
• Service cost (including current service cost, past service cost, as well as gains and losses on curtailments and settlements);
• Net interest expense or income; and
• Remeasurement.
Past service costs are recognised in the income statement on the earlier of:
• The date of the plan amendment or curtailment; and
• The date that the Group recognises restructuring-related costs or termination benefits.
The Group recognises the first two components of defined benefit costs in the income statement.
The retirement benefit recognised in the statement of financial position represents the present value of the defined benefit
obligation as reduced by the fair value of scheme assets. Any asset resulting from this calculation is limited to the present value
of available refunds and reductions in future contributions to the scheme.
Share-based payments
An expense is recognised for goods or services acquired in a share-based transaction when the goods are obtained or the
service received. The credit is booked as either a liability or in equity, depending on the type of share-based payment.
Equity-settled share-based payment transactions are transactions where Group shares are issued as consideration for goods
or services. They are measured in the income statement at the fair value of the equity instrument granted at the date of grant
with the corresponding amount booked to equity. The fair value determined at the grant date of equity-settled share-based
payments is expensed on a straight-line basis over the vesting period, based on the Group’s estimate of shares that will
eventually vest. The fair value calculation should reflect market-based performance conditions. The total expense will be
reduced by estimates of options that will not vest (due to leavers or not meeting non-market-based performance criteria).
Estimates of non-vesting are to be recalculated at each measurement date. For grants of equity instruments with market
conditions, the entity shall recognise the goods and services from a counterparty who satisfies other vesting conditions,
regardless of whether that market condition is satisfied.
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 period. 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 periods, 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.
Tax returns are prepared to adhere to tax rules and regulations and with all transactions being fully disclosed to the tax
authorities. However, the complex nature of tax sometimes means that the legislation is open to interpretation. In such cases,
judgement is required to quantify the tax liability to be reflected in the Financial Statements. If there is a reasonable possibility
that tax authorities may take a different view from the position taken in the filed returns then this will be reflected in the
Financial Statements in the form of a tax provision. In such cases, this provision will represent the full amount of any potential
liability until the matter is agreed with the tax authorities.
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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 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.
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 impairment losses.
The useful economic lives 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.
Depreciation is charged so as to write off the cost or valuation of assets, other than land or assets 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
Depreciation is charged to Other administrative costs in the income statement.
Assets purchased through a lease agreement are depreciated over their expected useful lives on the same basis as owned
assets or, where shorter, over the term of the relevant lease.
Right-of-use assets are depreciated over the term of the relevant lease.
Some fixtures and equipment, that comprise improvements or additions to an existing building, may be depreciated over the
same period as the related building, which could be longer than five years.
Reviews of the estimated remaining useful lives 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.
Capitalised borrowing costs
Borrowing costs incurred in financing the construction of qualifying assets such as property, plant and equipment are
capitalised up to the date at which the relevant asset is substantially complete. Borrowing costs are calculated using the
Group’s weighted average cost of borrowing during the period of capitalisation. All other borrowing costs are recognised
in the income statement in the period in which they are incurred.
Other intangible assets
Intangible assets, none of which are internally generated, have finite useful lives which 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. The assets are
amortised on a straight-line basis over their determined useful life.
The amortisation charge for customer relationships and customer contracts is recognised as an expense over 10 years, and
is charged to Other administrative costs in the income statement.
FINANCIAL STATEMENTS
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
Impairment
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’.
Please refer to Note 13 for details of the goodwill impairment assessment.
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
Classification
From 30 December 2018, the Group classifies its financial assets in the following measurement categories:
• Those to be measured subsequently at fair value (either through other comprehensive income (“OCI”) or through profit or loss); and
• Those to be measured at amortised cost.
For assets measured at fair value, gains and losses are recorded either in profit or loss or in OCI.
Measurement
At initial recognition, the Group measures a financial asset at its fair value plus, in the case of a financial asset not at fair value
through profit or loss (“FVPL”), transaction costs that are directly attributable to the acquisition of the financial asset.
Transaction costs of financial assets carried at FVPL are expensed in profit or loss.
Subsequent measurement depends on the cash flow characteristics of the asset. There are three measurement categories into
which the Group classifies its debt instruments:
• Amortised cost: Assets that are held for collection of contractual cash flows, where those cash flows represent solely payments
of principal and interest, are measured at amortised cost. Impairment losses are presented as a separate line item in the
income statement.
• FVOCI: Assets that are held for collection of contractual cash flows and for selling the financial assets, where the assets’ cash flows
represent solely payments of principal and interest, are measured at FVOCI. Movements in the carrying amount are taken through
OCI, except for the recognition of impairment gains or losses, interest income and foreign exchange gains and losses, which are
recognised in the income statement.
• FVPL: Assets that do not meet the criteria for amortised cost or FVOCI are measured at FVPL. Any fair value movement is
recognised in the income statement and presented net within other gains and (losses) in the period in which it arises.
Trade receivables are amounts due from customers for goods sold or services performed in the ordinary course of business.
The Group classifies its trade receivable balances dependent on its objectives with respect to the collection of contractual cash
flows. The Group operates non-recourse debtor factoring arrangements with four of its significant customers. Receivables
generated from goods sold to these customers are subsequently measured at fair value through the income statement, as the
objective of management is to sell the receivables (Held to sell business model). All other trade receivables are held with the
objective of collecting the contractual cash flows, and so these are measured subsequently at amortised cost using the effective
interest method (Held to collect business model).
Other receivables that have fixed or determinable payments that are not quoted in an active market are classified as financial assets
and 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.
Impairment
The Group assesses, on a forward-looking basis, the expected credit losses associated with its debt instruments carried at
amortised cost and FVOCI. The impairment methodology applied depends on whether there has been a significant increase in
credit risk.
For trade receivables, the Group applies the simplified approach permitted by IFRS 9, which requires expected lifetime losses
to be recognised from initial recognition of the receivables. The expected loss rates are based on the payment profiles of sales
before 25 December 2021 or 26 December 2020 respectively and the corresponding historical credit losses experienced within
this period. The historical loss rates are adjusted to reflect current and forward-looking information on macroeconomic factors
affecting the ability of the customers to settle the receivables.
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Trade receivables and contract assets are written off where there is no reasonable expectation of recovery. Indicators that there
is no reasonable expectation of recovery include, amongst others, the failure of a debtor to engage in a repayment plan with the
Group, and a failure to make contractual payments for a period of greater than 90 days past due.
Impairment losses on trade receivables and contract assets are presented in other administrative costs within operating profit.
Subsequent recoveries of amounts previously written off are credited against the same line item.
Financial liabilities
Financial liabilities held by the Group are classified as other financial liabilities at amortised cost and derivatives at FVPL.
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 FVPL. The effective interest method is a method of both calculating the amortised cost of a debt instrument and 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.
Fair value measurement
Financial instruments that are measured subsequent to initial recognition at fair value are grouped into levels 1 to 3 based on
the degree to which fair value is observable:
• Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities;
• Level 2 fair value measurements are those derived from inputs other than quoted prices included within level 1 that are observable
for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and
• Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not
based on observable market data (unobservable inputs).
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.
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 enters into a variety of derivative financial instruments to manage its exposure to interest rate and foreign exchange
rate risks, including foreign exchange forward contracts and interest rate swaps. Further details of derivative financial
instruments are disclosed in Notes 22 and 27. 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.
Derivatives are recognised initially at fair value at the date a derivative contract is entered into and are subsequently
remeasured to their fair value at each reporting date. The resulting gain or loss is recognised in profit or loss immediately
unless the derivative is designated and effective as a hedging instrument, in which event the timing of the recognition in profit
or loss depends on the nature of the hedge relationship.
A derivative with a positive fair value is recognised as a financial asset whereas a derivative with a negative fair value is
recognised as a financial liability. Derivatives are not offset in the financial statements unless the Group has both a legally
enforceable right and intention to offset. A derivative is presented as a non-current asset or a non-current liability if the
remaining maturity of the instrument is more than 12 months and it is not due to be realised or settled within 12 months.
Other derivatives are presented as current assets or current liabilities.
The Group designates interest rate swap derivatives as hedging instruments in respect of interest rate risk in cash flow hedges.
From 27 December 2020, the Group has designated all new forward foreign exchange contracts as cash flow hedges and hedge
accounting is applied to these instruments.
The hedging relationship is documented at inception. This documentation identifies the hedging instrument, the hedged item or
transaction, the nature of the risk being hedged and how hedge effectiveness will be measured throughout their duration. These
hedges have been designated as cash flow hedges and are expected, at inception and on an ongoing basis, to be highly effective
in offsetting changes in the cash flows of hedged items.
FINANCIAL STATEMENTS
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
The effective portion of changes in the fair value of derivatives and other qualifying hedging instruments that are designated
and qualify as cash flow hedges is recognised in other comprehensive income and accumulated under the heading of ‘hedging
reserve’, limited to the cumulative change in fair value of the hedged item from inception of the hedge. The gain or loss relating
to the ineffective portion is recognised immediately in profit or loss, and is included in the ‘other gains and losses’ line item.
Amounts previously recognised in other comprehensive income and accumulated in equity are reclassified to profit or loss in
the periods when the hedged item affects profit or loss, in the same line as the recognised hedged item.
The Group discontinues hedge accounting only when the hedging relationship (or a part thereof) ceases to meet the qualifying
criteria. This includes instances when the hedging instrument expires or is sold, terminated or exercised. The discontinuation
is accounted for prospectively. Any gain or loss recognised in other comprehensive income and accumulated in the hedging
reserve at that time remains in equity and is reclassified to profit or loss when the forecast transaction occurs. When a forecast
transaction is no longer expected to occur, the gain or loss accumulated in the cash flow hedge reserve is reclassified
immediately to profit or loss.
Government grants
Grants from the government are recognised at their fair value where there is a reasonable assurance that the grant will be
received and the Group will comply with all attached conditions.
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. Where a lease contract is onerous, the onerous
provision is calculated as the costs of meeting the obligations under the contract excluding lease rentals that are included
as part of the lease liability.
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 possibility of an outflow is more than remote. When an outflow becomes probable, it is
recognised as a provision.
2. SIGNIFICANT ACCOUNTING POLICIES CONTINUED
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3. CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY
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:
Critical judgements in applying the Group’s accounting policies
Presentation of exceptional items
The Group’s financial performance is analysed in two ways: underlying performance (which does not include exceptional items)
and exceptional items that are material and not expected to reoccur. Judgement is required as to whether items should be
presented as exceptional or underlying. Exceptional items will typically include material items that are significant in nature or
non-recurring and are important to users in understanding the business. Where disclosed, items have been considered by
management to meet this definition. For further details please see Note 7.
Key sources of estimation uncertainty
Pensions
The Group maintains a defined benefit pension plan for which it has recorded a pension asset. The pension asset is based on
an actuarial valuation that requires a number of assumptions including discount rate, inflation 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 workforce. Details of the principal
actuarial assumptions used in calculating the recognised asset/liability for the defined benefit plan, and the sensitivity of
reported amounts to changes in those assumptions, are given in Note 32.
Impairment of goodwill
The recoverable amount of CGUs or groups of CGUs are determined based on the higher of net realisable value and value in use
calculations. The carrying amount of the US CGU is £46.3 million (2020: £45.8 million) and the assumptions used to calculate its
recoverable amount are considered to be a key source of estimation uncertainty. The key assumptions that can impact the value
in use calculations are changes to the growth rates applied to derive a five-year forecast, or a movement in the discount rate
applied to the future cash flows. The Group has considered the impact of the assumptions used in the US CGU calculation and
has conducted sensitivity analysis on the impairment test of the US CGU carrying value. See Note 13 for further details.
Customer deductions
Management is required to make estimates in determining the amount and timing of recognition of customer deductions due
in respect of sales to its customers. In determining the amount of customer deductions due for volume-related allowances in
any period, management estimates whether customers will meet the purchase target volumes by the end of the arrangement,
based on historical and forecast performance, and recognises this cost as a deduction from revenue over the period of the
relevant arrangement. Where there are ongoing negotiations with customers over the level of deduction, the Group makes its
best estimate of the outcome based on a range of factors, including the latest negotiation position, past history and economic
factors such as price inflation or deflation. Accrued balances are reassessed quarterly to confirm they continue to meet the
requirements for recognition on an ongoing basis. As there is some judgement involved in the estimation of accruals, the Group
has conducted a sensitivity analysis and a movement equivalent to 0.5% of revenue would result in a credit or debit to the
Consolidated Income Statement of £9.4 million (2020: £9.0 million).
4. SEGMENTAL INFORMATION
The chief operating decision-maker (“CODM”) 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 into three regions, the UK, US and China, and prepares
and markets fresh prepared foods and produce in each region.
During the previous year the Group made the decision to consider the US and China business as two separate operating
segments, where they had previously been considered a single operating segment. The Group’s management accounts, which
show the information on which the CODM bases strategic decisions, now highlight the disaggregated figures for all the key lines
of information. Given the now differing economic situations of the two international businesses, key decisions on allocating
resources, such as capital expenditure, are now made on a UK/US/China basis.
The Group manages the performance of its businesses through the use of ‘Adjusted operating profit’, as defined in Note 36.
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.
FINANCIAL STATEMENTS
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
The following table provides an analysis of the Group’s segmental information for the period to 25 December 2021:
£ million Note UK US China Un-allocated Total
Revenue 36 1,592.4 180.1 99.1 – 1,871.6
Adjusted EBITDA 36 149.3 15.7 1.8 – 166.8
Depreciation (52.0) (6.4) (6.8) – (65.2)
Amortisation (0.1) (0.4) – – (0.5)
Share scheme charges (2.3) – – – (2.3)
Profit on disposal of property, plant and equipment 2.9 – – – 2.9
Share of results of associates – – 0.3 – 0.3
Adjusted operating profit/(loss) 36 97.8 8.9 (4.7) – 102.0
Exceptional items – – – – –
Operating profit/(loss) 97.8 8.9 (4.7) – 102.0
Finance costs (17.1)
Other gains and (losses) (3.5)
Profit before tax 81.4
Tax (24.6)
Profit for the period 56.8
Other segment information:
Capital additions 59.6 9.0 6.8 – 75.4
Interests in associates – – 11.7 – 11.7
Total assets 1,238.7 144.1 86.7 34.0 1,503.5
Non-current assets 1,068.9 120.2 66.8 2.6 1,258.5
All of the Group’s revenue is derived from the sale of goods in 2021. There were no inter-segment revenues. The un-allocated
assets of £34.0 million relate to cash and cash equivalents and derivative financial instruments which cannot be readily
allocated because of the Group cash-pooling arrangements that are in place to provide funds to businesses across the Group.
The following table provides an analysis of the Group’s segmental information for the period to 26 December 2020:
£ million Note UK US China Un-allocated Total
Revenue 36 1,566.6 146.5 80.4 – 1,793.5
Adjusted EBITDA 36 145.3 8.0 (1.1) – 152.2
Depreciation (53.0) (6.8) (6.3) – (66.1)
Amortisation (0.1) (0.4) – – (0.5)
Share scheme charges (1.2) – – – (1.2)
Loss on disposal of property, plant and equipment (0.3) (0.2) (0.4) – (0.9)
Share of results of associates – – 0.1 – 0.1
Adjusted operating profit/(loss) 36 90.7 0.6 (7.7) – 83.6
Exceptional items – Impairment 7 (16.7) – – – (16.7)
Exceptional items – Other 7 (4.9) – – – (4.9)
Operating profit/(loss) 69.1 0.6 (7.7) – 62.0
Finance costs (21.0)
Other gains and (losses) 3.2
Profit before tax 44.2
Tax (10.1)
Profit for the period 34.1
Other segment information:
Capital additions 58.8 3.0 6.6 – 68.4
Interests in associates – – 12.1 – 12.1
Total assets 1,204.0 136.9 82.9 25.4 1,4 49.2
Non-current assets 1,035.7 121.9 65.9 – 1,223.5
All of the Group’s revenue is derived from the sale of goods in 2020. There were no inter-segment revenues. The un-allocated
assets of £25.4 million relate to cash and cash equivalents which cannot be readily allocated because of the Group cash-pooling
arrangements that are in place to provide funds to businesses across the Group.
4. SEGMENTAL INFORMATION CONTINUED
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Major customers
In 2021, the Group’s four largest customers accounted for 74.0% (2020: 75.2%) of the Group’s total revenue from continuing
operations. These customers accounted for 87.0% (2020: 86.7%) of total UK revenue from continuing operations. The Group
does not enter into long-term contracts with its retail customers.
Each of these four customers’ accounts for a significant amount of the Group’s revenue and are all in the UK segment.
The percentage of Group revenue from these customers is as follows:
2021 2020
Customer A 33.4% 35.7%
Customer B 20.3% 20.0%
Customer C 11.5% 11.1%
Customer D 8.8% 8.4%
5. REVENUE
The Group derives all revenue from the sale of goods in the following geographic locations:
£ million 2021 2020
Continuing operations
UK 1,592.4 1,566.6
US 180.1 146.5
China 99.1 80.4
1,871.6 1,793.5
Upon completion of delivery (the performance obligation), the terms of the order allow 30 to 75 days (2020: 35 to 75 days) for payment,
dependent on the relevant customers’ payment terms. The Group has in place trade receivable factoring arrangements. These are
non-recourse arrangements which were applicable to 67.5% (2020: 69.4%) of the Group’s total sales. These arrangements allow the
Group to choose to factor the receivable for approved invoices and receive payment ahead of the agreed terms on a non-recourse basis.
6. PROFIT BEFORE TAX
Profit before tax for the period has been arrived at after charging/(crediting):
£ million Note 2021 2020
Depreciation of property, plant and equipment:
• Owned 53.2 53.8
• Leased 12.0 12.3
Research and development costs 8.6 7.0
Cost of inventory recognised as an expense 836.0 809.5
Net movement of inventory provision recognised as (gain)/expense (0.2) 4.1
Amortisation of intangible assets 0.5 0.5
Exceptional items 7 – 21.6
(Profit)/loss on disposal of property, plant and equipment (2.9) 0.9
Share scheme charges 31 2.3 1.2
Foreign exchange (gains)/losses 10 (0.5) 0.2
Staff costs 8 539.2 514.0
Other administrative costs (net) are comprised of:
£ million 2021 2020
Other administrative costs (371.1) (361.5)
Other operating charges (0.3) (1.1)
Total operating costs (371.4) (362.6)
Other operating income 7.5 2.5
Other administrative costs (net) (363.9) (360.1)
Other operating charges and income relate to an insurance claim which resulted in a net profit of £7.2 million (2020: £1.4 million).
This included proceeds that were used to replace damaged assets which resulted in a gain on disposal of fixed assets of £1.6
million (2020: loss of £0.2 million).
The analysis of the Auditors’ remuneration is as follows:
£ million 2021 2020
The audit of the Company’s Consolidated Financial Statements 0.3 0.2
1
The audit of the Company’s subsidiaries pursuant to legislation 0.7 0.5
Total audit fees 1.0 0.7
1 The prior year figure has been restated to reflect audit fee amendments relating to the audit of the prior year Financial Statements.
Non-audit fees of £40,000 (2020: £40,000) were paid to the Group’s Auditors for permitted services.
FINANCIAL STATEMENTS
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
7. EXCEPTIONAL ITEMS
The Group’s financial performance is analysed in two ways: review of underlying performance (which does not include
exceptional items) and separate review of exceptional items that are material and not expected to reoccur. The Directors
consider that the underlying performance is more representative of the ongoing operations and key metrics of the Group.
Exceptional items are those that, in management’s judgement, should be disclosed by virtue of their nature or amount. Exceptional
items include material items that are non-recurring, significant in nature and are important to users in understanding the
business, including restructuring costs, accelerated amortisation of financing fees and impairment of assets:
£ million 2021 2020
Restructuring costs, impairment and onerous contract provision – 21.6
Operating loss – 21.6
Finance costs – 1.7
Loss before tax – 23.3
Tax on exceptional items – (4.4)
Loss after tax – 18.9
2021
No exceptional costs have been incurred by the Group.
2020
The Group incurred £23.3 million of costs presented as exceptional items in 2020, and an after tax charge of £18.9 million.
The closure of two salads factories in Alresford and Spalding led to cash restructuring charges of £4.9 million, with a further
£8.2 million impairment charge in respect of their tangible fixed assets. Following a review of assets, the Group also incurred
a further impairment charge of £8.5 million in the UK business for assets that are now either redundant or related to products
that have been discontinued in the year. In addition, the Group incurred £1.7 million of accelerated amortisation of refinancing
fees following the Group’s refinancing of its core debt facilities on 18 March 2020.
8. STAFF COSTS
The average monthly number of employees (including Executive Directors) during the period was:
2021
Number
2020
Number
Production 15,578 15,938
Management and administration 2,521 2,488
Sales and distribution 873 892
18,972 19,318
Their aggregate remuneration comprised:
£ million Note 2021 2020
Wages and salaries 471.1 446.3
Social security and other costs 55.9 55.0
Other pension costs 32 12.2 12.7
539.2 514.0
During 2020 the Group furloughed a number of its employees across its UK sites for varying periods of time, under the UK
Government’s Coronavirus Job Retention Scheme. Amounts received by the Group constitute a government grant and, as of
26 December 2020, all conditions of the scheme were met. As such in 2020, the Group recognised £12.8 million as a reduction to
staff costs, in respect of this grant. The Group did not use the UK Government’s Coronavirus Job Retention Scheme during 2021.
Details of the emoluments paid to Directors are included from pages 124 to 141 in the Directors’ Remuneration Report and in
Note 33.
9. FINANCE COSTS
£ million Note 2021 2020
Interest on borrowings 14.2 18.2
Interest on lease liabilities 2.7 2.7
Unwinding of discount on provisions 26 0.2 0.1
Total 17.1 21.0
There were no borrowing costs included in the cost of qualifying assets during 2020 or 2021. Borrowing costs included in
the cost of qualifying assets during prior years arose within the general borrowing pool and were calculated by applying a
capitalisation rate of 3.0% to expenditure on such assets.
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Amounts included in the cost of qualifying assets have been capitalised under IAS 23 and are therefore subject to deferred tax;
the deferred tax charge to income was £nil (2020: £0.1 million).
Interest on borrowings for 2021 includes no exceptional costs (2020: £1.7 million in respect of the accelerated amortisation of
previous financing fees following the Group’s refinancing of its debt facilities on 18 March 2020).
10. OTHER GAINS AND (LOSSES)
£ million 2021 2020
Foreign exchange gains/(losses) 0.5 (0.2)
Change in the fair value of derivative financial instruments (4.0) 3.4
(3.5) 3.2
11. TA X
£ million Note 2021 2020
Current tax:
Current period 7.6 12.1
Prior period adjustment 0.2 0.5
Total current tax charge 7.8 12.6
Deferred tax:
Deferred tax relating to the origination and reversal of temporary differences in the period 7.6 (5.2)
Deferred tax relating to changes in tax rates 7.9 1.5
Prior period adjustment 1.3 (0.4)
Unrecognised tax loss originating in the current period – 1.6
Total deferred tax charge/(credit) 23 16.8 (2.5)
Tax charge for the period 24.6 10.1
The Group tax charge for the period was £24.6 million (2020: £10.1 million) which represents an effective tax rate of 30.2%
(2020: 22.9%) on profit before tax of £81.4 million (2020: £44.2 million). Tax is calculated using prevailing statutory rates in the
territories in which we operate however most of the Group’s profits are earned in the UK where the statutory tax rate is 19%
for 2021 (2020: 19%).
The effective tax rate is 11.2% higher (2020: 3.9%) than the UK statutory tax rate of 19% (2020: 19%). The main item which
increases the effective rate by 9.7% is a deferred tax charge arising in connection with the rate at which we provide for deferred
tax assets and liabilities. This is following the Government announcement on 3 March 2021 and the substantive enactment of
this measure on 24 May 2021, that the UK corporation tax rate will increase to 25% effective from 1 April 2023. We have
therefore valued deferred tax assets and liabilities at 25% at the balance sheet date, up from 19% at 26 December 2020.
Excluding exceptional items and other adjusting items the effective tax rate on underlying activities was 29.7% (2020: 21.7%)
(see Note 36).
In 2021 the tax risk provision was £1 million (2020: £1 million) because it is considered unlikely that the tax authorities will take
a different approach to any material calculations of tax liability.
The charge for the period can be reconciled to the profit per the consolidated income statement as follows:
2021
£ million
2021
%
2020
£ million
2020
%
Profit before tax: 81.4 100.0 44.2 100.0
Tax charge at the UK corporation tax rate of 19% (2020: 19%) 15.5 19.0 8.4 19.0
Non-deductible expenses (1.8) (2.0) – –
Prior period adjustment 1.5 1.7 0.1 0.2
Tax effect of losses carried forward not recognised 0.7 0.9 1.6 3.9
Unprovided deferred tax assets now recognised (0.1) (0.2) – –
Overseas taxes at different rates 0.9 1.1 (1.5) (3.5)
Deferred tax change in rate 7.9 9.7 1.5 3.5
Tax charge and effective tax rate for the period 24.6 30.2 10.1 22.9
FINANCIAL STATEMENTS
175
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Annual Report & Accounts 2021
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
In addition to amounts charged to the consolidated income statement, the following amounts in respect of tax were charged/
(credited) to the consolidated statement of comprehensive income and equity:
2021
£ million
2020
£ million
Tax relating to components of other comprehensive income/(expense):
Deferred tax:
Remeasurements on defined benefit pension scheme actuarial gain 4.6 0.1
Deferred tax rate change on defined benefit pension scheme actuarial gain 2.0 –
Cash flow hedges and cost of hedging 0.2 (0.2)
Deferred tax on share schemes 0.1 0.1
6.9 –
Tax relating to components of other comprehensive income/(expense): 6.8 (0.1)
Tax relating to share-based payments recognised directly in equity: 0.1 0.1
6.9 –
As disclosed in the prior year accounts, HMRC has previously raised an enquiry in the UK concerning the structure used to fund
overseas investment during the two periods ended 30 December 2017 and 29 December 2018 and if successful, approximately
£0.3 million additional UK tax would have been payable for those years. During the year ended 25 December 2021, however,
the HMRC enquiry was settled resulting in no additional UK tax being due. Since no provision had been made for the potential
£0.3million, no further provisions or releases are included in these accounts in respect of 2017 and 2018. In addition to this,
for each of the following three years up to and including the current period ended 25 December 2021, there is uncertainty in
connection with the applicability of the UK tax rules to the structure which could lead to additional UK tax payable. This is a
complex area with a range of possible outcomes and judgement has been used in calculating the provision. For these reasons
it cannot be known with certainty whether additional amounts of UK tax will be due, however, we consider it is unlikely that there
will be material amounts due over and above the provisions currently held.
12. EARNINGS PER SHARE
The calculation of earnings per Ordinary share is based on earnings after tax and the weighted average number of Ordinary
shares in issue during the period.
For diluted earnings per share, the weighted average number of Ordinary shares in issue is adjusted to assume conversion of all
potentially dilutive Ordinary shares.
The calculation of the basic and diluted earnings per share is based on the following data:
Earnings
£ million 2021 2020
Profit for the period 56.8 34.1
Number of shares
‘000 2021 2020
Weighted average number of Ordinary shares 579,426 579,426
Effect of potentially dilutive Ordinary shares 9,775 4,193
Weighted average number of Ordinary shares including dilution 589,201 583,619
2021 2020
Basic earnings per share 9.8p 5.9p
Diluted earnings per share 9.6p 5.8p
The Group calculates Adjusted basic earnings per Ordinary share and details of this can be found in Note 36, Alternative
performance measures.
11. TA X CONTINUED
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13. GOODWILL
£ million
Cost
At 29 December 2019 703.2
Exchange differences (1.1)
At 26 December 2020 702.1
Exchange differences 1.0
At 25 December 2021 703.1
Accumulated impairment losses
At 29 December 2019 (52.0)
Exchange differences (0.5)
At 26 December 2020 (52.5)
Exchange differences (0.5)
At 25 December 2021 (53.0)
Carrying amount
At 25 December 2021 650.1
At 26 December 2020 649.6
Goodwill acquired in a business combination is allocated, at acquisition, to the CGUs or group of CGUs that are expected to
benefit from that business combination. The carrying value of goodwill has been allocated to CGU groupings as follows:
£ million
25 December
2021
26 December
2020
UK 603.8 603.8
US 46.3 45.8
China – –
650.1 649.6
The recoverable amounts of the CGUs or groups of CGUs are determined based on value in use calculations.
There was no impairment recognised during the period (2020: £nil).
The Group is committed to achieving net zero carbon emissions across our Group operations by 2040. For the current year
impairment review, management have also included the future costs and capital expenditure required to meet this commitment
in its value-in-use calculations and sensitivity analyses.
The key assumptions used in the impairment reviews for the CGUs that held goodwill at 25 December 2021 and 26 December
2020 were as follows:
• Discount rates: Management uses pre-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 of 8.4% (2020: 7.9%) for
the UK and 8.9% for the US (2020: 8.6%).
• Growth rates: The revenue growth rates are based on management growth forecasts based on industry experience. Changes
in selling prices and direct costs are based on past practices and expectations of future changes in the market. The Group has
prepared cash flow forecasts derived from the most recent financial budget approved by management for the next four years (2020:
three years), as determined by the business units, and extrapolated cash flows for the following years based on an estimated revenue
growth rate ranging from 2% to 3% whilst maintaining margins at the 2023 budget levels, through to 2030, at which point a terminal
value is applied. This terminal value includes an estimate of carbon costs. Cash flows are then extrapolated using a perpetuity
growth rate of 2.0% (2020: 2.0%) for the UK and 2.3% for the US (2020: 2.3%).
The headroom for each CGU based on the impairment review is as follows:
£ million UK US
Headroom of impairment test based on management assumptions 466.5 166.6
FINANCIAL STATEMENTS
177
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Annual Report & Accounts 2021
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
The Group has conducted a sensitivity analysis on the impairment test of each CGU’s carrying value. The assumptions used, and
the impact of sensitivities on these assumptions for the US CGU, which has lower levels of headroom, are shown below, none of
which indicate an impairment is likely:
• The pre-tax discount rate for the US CGU is 8.9%. If the pre-tax discount rate for this CGU were to be increased by 0.5% from 8.9% to
9.4% then the headroom would be reduced to £146.7 million. An increase to the pre-tax discount rate from 8.9% to 13.9% would result
in no headroom.
• The perpetuity growth rate included in the US CGU future cash flows is 2.3%. If the perpetuity growth rate was to decrease to 1.3% it
would still leave headroom of £132.4 million.
• A key sensitivity for the Group is Adjusted EBITDA, whether through the loss of revenue or from lower operating margins. If Adjusted
EBITDA over the five-year forecast period were to be reduced by 10% in the US CGU then this would result in the headroom being
reduced to £125.4 million.
14. OTHER INTANGIBLE ASSETS
£ million
Customer
relationships
Cost
At 29 December 2019 89.1
Exchange differences (0.2)
At 26 December 2020 88.9
Exchange differences –
At 25 December 2021 88.9
Accumulated amortisation and impairment
At 29 December 2019 (86.4)
Charge for the period (0.5)
Exchange differences 0.2
At 26 December 2020 (86.7)
Charge for the period (0.5)
Exchange differences –
At 25 December 2021 (87.2)
Carrying amount
At 25 December 2021 1.7
At 26 December 2020 2.2
13. GOODWILL CONTINUED
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15. PROPERTY, PLANT AND EQUIPMENT
£ million
Land and
buildings
Plant and
machinery
Fixtures and
equipment Total
Cost
At 29 December 2019 379.7 528.8 91.8 1,000.3
Reclassification (2.1) 2.1 – –
Additions 14.6 41.7 12.0 68.3
Disposals (2.1) (12.5) (3.7) (18.3)
Exchange differences (1.0) (0.3) 0.1 (1.2)
At 26 December 2020 389.1 559.8 100.2 1,049.1
Reclassification (0.3) (2.4) 1.7 (1.0)
Additions 18.6 39.4 17.4 75.4
Disposals (2.8) (5.5) (1.5) (9.8)
Exchange differences 1.9 1.8 0.3 4.0
At 25 December 2021 406.5 593.1 118.1 1,117.7
Accumulated depreciation and impairment
At 29 December 2019 (134.1) (254.7) (57.8) (446.6)
Charge for the period (18.8) (35.5) (11.8) (66.1)
Impairment (3.9) (15.0) (0.2) (19.1)
Disposals 2.0 11.5 3.6 17.1
Exchange differences 0.5 0.4 – 0.9
At 26 December 2020 (154.3) (293.3) (66.2) (513.8)
Reclassification 0.1 0.6 0.3 1.0
Charge for the period (20.0) (33.0) (12.2) (65.2)
Impairment (1.3) – – (1.3)
Disposals 1.8 5.4 1.3 8.5
Exchange differences (0.6) (0.9) (0.2) (1.7)
At 25 December 2021 (174.3) (321.2) (77.0) (572.5)
Carrying amount
At 25 December 2021 232.2 271.9 41.1 545.2
At 26 December 2020 234.8 266.5 34.0 535.3
FINANCIAL STATEMENTS
179
Bakkavor Group plc
Annual Report & Accounts 2021
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
Included within Land and buildings is freehold land held at historic cost of £11.5 million (2020: £11.8 million). Freehold land
is not depreciated.
The Group has split the net book value of property, plant and equipment relating to leases between amounts previously
recognised as finance leases under IAS 17 and amounts recognised as right-of-use assets under IFRS 16. This allows
management to review performance excluding IFRS 16, as set out in Note 36, Alternative performance measures.
The carrying value of the Group’s plant and machinery includes an amount of £2.8 million (2020: £3.4 million) in respect
of assets held under leases previously recognised as finance leases before the introduction of IFRS 16.
The carrying value of the Group’s land and buildings and plant and machinery includes an amount of £73.2 million (2020:
£71.7 million) in respect of assets held under IFRS 16 Leases. Further details of these leases are disclosed in Note 24.
The carrying value of the Group’s plant and machinery includes an amount of £30.9 million (2020: £21.6 million) in respect
of assets held as security under Asset Finance Facilities. Further details of these facilities are disclosed in Note 21.
At 25 December 2021, the Group had entered into contractual commitments for the acquisition of property, plant and equipment
amounting to £5.2 million (2020: £1.9 million).
Assets are not depreciated until they are brought into use. At 25 December 2021 a total of £44.6 million (2020: £21.4 million)
of other assets were in progress and had not been brought into use.
During 2021, an impairment to land and buildings of £1.3 million (2020: £2.3 million) arose from fully writing down the right-of-
use assets held by a Group business which has ceased trading.
During 2020, the Group impaired £1.6 million of land and buildings excluding right-of-use assets, £15.0 million of plant and
machinery and £0.2 million of fixtures and equipment. These impairment charges arose from site closures and a review of assets
no longer in use, due to products which had been discontinued during the year. This resulted in redundant, non-moveable,
specialist assets which were assessed as having £nil value in use and are not saleable due to their specialist nature. The
impairments were determined by comparing the carrying values of the assets with their recoverable amount being the higher
of the asset’s fair value less costs of disposal and its value in use. The impairments charged in that year of £19.1 million wholly
related to the UK sector, of which £16.8 million were included within Other administrative costs as exceptional items (Note 7).
16. SUBSIDIARIES
The Group consists of a Parent Company, Bakkavor Group plc, incorporated in the UK, and a number of subsidiaries and
associates held directly and indirectly by Bakkavor Group plc. Note 5 to the Company’s separate Financial Statements provides
details of the interests in subsidiaries.
17. INTERESTS IN ASSOCIATES AND OTHER INVESTMENTS
£ million 2021 2020
Name of associate
La Rose Noire Limited 11.2 11.7
Patisserie et Chocolat Limited 0.5 0.4
Total associates 11.7 12.1
Other investments 0.1 0.1
Total associates and other investments 11.8 12.2
Details of the associated undertakings of the Group at 25 December 2021 and 26 December 2020 were as follows:
Proportion of Ordinary shares
Place of registration
and operation Principal activity 2021 2020
Method of
accounting
Name of associate
La Rose Noire Limited Hong Kong Producer of bakery and pastry products 45% 45% Equity
Patisserie et Chocolat Limited Hong Kong Producer of bakery and pastry products 45% 45% Equity
The following tables summarise the financial information of the Group’s material associate, La Rose Noire Limited, as included
in its own financial statements:
Associate’s income statement
£ million 2021 2020
Revenue 9.4 9.1
Profit/(loss) before taxation 0.5 (0.2)
Taxation (0.1) –
Profit/(loss) after taxation 0.4 (0.2)
Group’s share of profit/(loss) after taxation (45%) 0.2 (0.1)
15. PROPERTY, PLANT AND EQUIPMENT CONTINUED
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Annual Report & Accounts 2021
Associate’s statement of financial position
£ million
25 December
2021
26 December
2020
Non-current assets 0.9 1.2
Current assets 5.5 6.1
Current liabilities (1.2) (1.1)
Net assets 5.2 6.2
Group’s share of net assets (45%) 2.3 2.8
Goodwill on acquisition 8.9 8.9
Carrying amount of associate at end of period 11.2 11.7
Carrying amount of associate
£ million
25 December
2021
26 December
2020
At beginning of period 11.7 12.3
Share of profit/(loss) after taxation of associate 0.2 (0.1)
Exchange differences – (0.4)
Dividends received (0.7) (0.1)
At end of period 11.2 11.7
The following table summarises the carrying amount of the Group’s immaterial associate, Patisserie et Chocolat Limited:
£ million
25 December
2021
26 December
2020
Associates that are not individually material
At beginning of period 0.4 0.2
Share of profit after tax 0.1 0.2
At end of period 0.5 0.4
Other investments amount to £0.1 million at 25 December 2021 (26 December 2020: £0.1 million).
18. INVENTORIES
£ million
25 December
2021
26 December
2020
Raw materials and packaging 60.7 54.3
Work-in-progress 2.0 2.3
Finished goods 8.1 7.2
70.8 63.8
There is no material difference between the book value and replacement cost of inventories.
19. TRADE AND OTHER RECEIVABLES
£ million
25 December
2021
26 December
2020
Amounts receivable from trade customers 118.2 115.2
Expected credit loss (2.8) (1.6)
Net amounts receivable from trade customers 115.4 113.6
Other receivables 17.2 14.9
Prepayments 10.2 7.9
142.8 136.4
During the period, the Group has continued to operate trade receivable factoring arrangements. These are non-recourse
arrangements and therefore amounts are de-recognised from trade receivables. At 25 December 2021 £118 million was drawn
under factoring facilities (2020: £106 million) representing cash collected before it was contractually due from the customer.
As at 25 December 2021, the Group’s Amounts receivable from trade customers includes £53.8 million (2020: £56.6 million),
which could be factored under the non-recourse trade receivable factoring arrangement.
The average credit period taken on sales of goods is 21 days (2020: 19 days). An expected credit loss allowance has been made
for estimated irrecoverable amounts from the sale of goods of £2.8 million (2020: £1.6 million). Expected credit loss allowances
against receivables are made on a specific basis based on objective evidence and previous default experience as well as with
reference to assumptions about the risk of default and expected future loss rates. 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, while assumptions about the risk of default remain unchanged.
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.
FINANCIAL STATEMENTS
181
Bakkavor Group plc
Annual Report & Accounts 2021
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
The Other receivables amount mainly relates to non-specific amounts, the largest of which is recoverable VAT.
The following table is an ageing analysis of net trade receivables from customers:
£ million
25 December
2021
26 December
2020
Not past due 106.8 104.4
Past due by 1 – 30 days 7.0 7.2
Past due by 31 – 60 days 0.8 1.1
Past due by 61 – 90 days 0.4 0.5
Past due by more than 90 days 0.4 0.4
115.4 113.6
There was no impact from trade receivables renegotiated in 2021 that would have otherwise been past due or impaired (2020:
no impact).
The four major customers of the Group, representing 74.0% (2020: 75.2%) of the Group’s revenue from continuing operations,
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 Group does not consider that it is
exposed to any significant credit risk and therefore the carrying amount of trade receivables represents the expected
recoverable amount and there is no further credit risk exposure.
The following table is an analysis of the movement of the expected credit loss for the Group’s trade receivables:
£ million
25 December
2021
26 December
2020
Balance at beginning of the period (1.6) (1.6)
Allowances recognised against receivables (2.5) (0.9)
Amounts written off as uncollectible during the period 0.6 0.3
Amounts recovered during the period 0.6 0.4
Allowance reversed 0.1 0.2
Balance at end of the period (2.8) (1.6)
20. CASH AND CASH EQUIVALENTS
£ million
25 December
2021
26 December
2020
Cash and cash equivalents 31.1 24.8
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.
21. BORROWINGS
The interest rates and currency profile of the Group’s borrowings at 25 December 2021 were as follows:
£ million Currency
Facility amount
£ million
Amount drawn
down at year
end £ million Interest rate
Non-utilisation
fee Maturity date
Term Loan GBP 225.0 225.0 SONIA
2
plus a margin of 2.25% N/A Mar 2025
1
Revolving Credit Facility (“RCF”) GBP 230.0 65.0 SONIA
2
plus a margin of 2.25% 0.7875% Mar 2025
1
Asset Finance Facility GBP 21.7 21.7 Fixed interest rate N/A Aug 2027
Asset Finance Facility GBP 12.1 12.1 Fixed interest rate N/A Jun 2028
Total 488.8 323.8
1 £12.4 million of the term loan and £12.6 million of the RCF mature in March 2024.
2 The interest rate for these facilities includes a Credit Spread Adjustment following the transition from LIBOR to SONIA in September 2021.
On 18 March 2020, the Group completed a refinancing of its core debt facilities through a new term loan and Revolving Credit
Facility totalling £455 million. The refinancing resulted in the addition of new lenders to the Group. The new facilities were due
to mature in March 2024, with an option to extend the tenure by a further two years subject to lender approval. £430 million of
these facilities were extended in March 2021, to mature in March 2025.
19. TRADE AND OTHER RECEIVABLES CONTINUED
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The Group’s total banking facilities amount to £455.0 million (2020: £512.5 million) comprising (i) £225.0 million in term loans
(2020: £282.5 million term loan), with £12.4 million maturing in March 2024 and £212.6 million in March 2025 and (ii) £230.0
million Revolving Credit Facilities (“RCF”) (2020: £230.0 million RCF), which includes an overdraft and money market facility of
£20.0 million (2020: £20.0 million) and further ancillary facilities of £13.3 million (2020: £13.3 million). For the RCF, £12.6 million
matures in March 2024 and £217.4 million in March 2025. The bank facilities are unsecured. These banking facilities are subject to
covenant agreements including the Group maintaining a minimum interest cover of 4.0x and not exceeding an adjusted leverage
of 3.0x. In addition, the Group has access to £8.4 million of local overdraft facilities in the US and China which are unsecured.
In September 2021 the Group transitioned from LIBOR to SONIA, as described in Note 1. £455.0 million of the total £488.8
million of facilities were subject to this transition.
The Asset Finance Facility is made up of two separate facilities which are secured against specific items of plant and machinery.
Firstly, a £25.0 million facility, which could be drawn against up to August 2020, of which the Group initially drew down £24.9
million with £21.7 million outstanding at the end of 2021. No further draw down can be made against this facility. The facility has
been drawn in tranches, with each tranche being repaid on a quarterly basis over a period of seven years, and the weighted
average interest rate for the facility at 25 December 2021 was 2.41% (2020: 2.41%). The interest rate is fixed at the prevailing rate
on commencement of the loan tranche. Secondly, the Group has drawn down £13.1 million during the year under a separate
asset financing facility with £12.1 million outstanding at the end of 2021. No further draw down can be made against this facility.
The facility has been drawn in tranches, with each tranche being repaid on a monthly basis over a period of seven years, and the
weighted average interest rate for the facility at 25 December 2021 is 3.20% (2020: n/a). The interest rate is fixed at the
prevailing rate on commencement of the loan tranche.
During 2021, the Group repaid two term loans with total capital repayments being £57.5 million. £37.5 million related to a term
loan which was due to mature in June 2024 but which was repaid early with £17.5 million paid in April 2021 and £20.0 million in
September 2021. The remaining £20.0 million was paid in November 2021 when an additional term loan matured.
£ million
25 December
2021
26 December
2020
Bank loans 320.6 354.6
320.6 354.6
Borrowings repayable as follows:
On demand or within one year 3.0 23.2
In the second year 2.9 1.2
In the third to fifth years inclusive 303.1 318.5
Over five years 11.6 11.7
320.6 354.6
Analysed as:
Amount due for settlement within 12 months (shown within current liabilities) 3.0 23.2
Amount due for settlement after 12 months 317.6 331.4
320.6 354.6
As at 25 December 2021 and 26 December 2020, all of the Group’s borrowings were denominated in Sterling.
2021
%
2020
%
The weighted average interest rates paid were as follows:
Bank loans and overdrafts 2.54 2.68
Apart from the Asset Finance Facility, interest on the Group’s term loan and other borrowings are at floating rates, thus
exposing the Group to cash flow interest rate risk. This risk is mitigated using interest rate swaps as set out in Note 27.
The fair value of the Group’s borrowings is as follows:
£ million
25 December
2021
26 December
2020
Fair value of the Group’s borrowings 323.8 356.6
FINANCIAL STATEMENTS
183
Bakkavor Group plc
Annual Report & Accounts 2021
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
Net debt is the net of cash and cash equivalents, prepaid fees to be amortised over the term of outstanding borrowings,
outstanding borrowings, interest accrued on borrowings and lease liabilities and is as follows:
£ million
25 December
2021
26 December
2020
Analysis of net debt
Cash and cash equivalents 31.1 24.8
Borrowings (4.1) (22.3)
Interest accrual (0.2) (2.3)
Unamortised fees 1.3 1.4
Lease liabilities (10.8) (11.1)
Debt due within one year (13.8) (34.3)
Borrowings (319.7) (334.3)
Unamortised fees 2.1 2.9
Lease liabilities (73.8) (70.9)
Debt due after one year (391.4) (402.3)
Group net debt (374.1) (411.8)
22. DERIVATIVE FINANCIAL INSTRUMENTS
£ million
25 December
2021
26 December
2020
Foreign currency contracts – designated in a hedging relationship 0.1 –
Interest rate contracts – designated in a hedging relationship 2.5 –
Included in non-current assets 2.6 –
Foreign currency contracts – held at fair value through profit and loss – 0.6
Foreign currency contracts – designated in a hedging relationship 0.3 –
Included in current assets 0.3 0.6
Foreign currency contracts – held at fair value through profit and loss (0.9) (0.9)
Foreign currency contracts – designated in a hedging relationship (0.8) –
Included in current liabilities (1.7) (0.9)
Foreign currency contracts – designated in a hedging relationship (0.4) –
Interest rate contracts – designated in a hedging relationship – (0.9)
Included in non-current liabilities (0.4) (0.9)
Total 0.8 (1.2)
Derivative financial instruments are subject to enforceable master netting agreements, however are not set off on the balance
sheet. Under the terms of these arrangements, only where certain credit events occur (such as default), will the net position owing/
receivable to a single counterparty in the same currency be taken as owing and all the relevant arrangements terminated.
Further details of derivative financial instruments are provided in Note 27.
23. 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
Accelerated tax
depreciation
IAS 23
capitalised
interest
Fair value
gains Intangibles Provisions
Retirement
benefit
obligations
Share
scheme
Overseas tax
losses and
accrued interest US goodwill Total
At 29 December 2019 (26.4) (0.4) 0.7 (0.1) 0.4 (1.6) 0.8 25.3 (7.9) (9.2)
Credit/(charge) to income 1.1 (0.1) (0.7) – 0.1 (0.4) (0.5) 2.3 (0.9) 0.9
Exchange differences – – – – – – – 1.3 0.3 1.6
Charge to equity – – 0.2 – – (0.1) (0.1) – – –
At 26 December 2020 (25.3) (0.5) 0.2 (0.1) 0.5 (2.1) 0.2 28.9 (8.5) (6.7)
Credit/(charge) to income (13.7) – 0.2 (0.1) 0.2 (0.6) 0.6 (2.6) (0.8) (16.8)
Exchange differences (0.1) – – – – – – (0.2) – (0.3)
Charge to equity – – (0.2) – – (6.6) (0.1) – – (6.9)
At 25 December 2021 (39.1) (0.5) 0.2 (0.2) 0.7 (9.3) 0.7 26.1 (9.3) (30.7)
21. BORROWINGS CONTINUED
184
Bakkavor Group plc
Annual Report & Accounts 2021
Certain deferred tax assets and liabilities have been offset where the Group has a legally enforceable right to do so.
The following is the analysis of the deferred tax balances (after offset) for financial reporting purposes:
£ million
25 December
2021
26 December
2020
Deferred tax asset 9.9 13.0
Deferred tax liabilities (40.6) (19.7)
(30.7) (6.7)
Deferred tax assets in respect of some capital losses as well as trading loses have not been recognised as their future recovery
is uncertain or not currently anticipated. The total gross deferred tax assets not recognised are as follows:
£ million
25 December
2021
26 December
2020
Capital losses 3.4 3.7
Trading losses 14.6 13.9
18.0 17.6
The capital losses arose in the UK and are available to carry forward indefinitely but can only be offset against future capital
gains. The trading losses are non-UK losses and are available to offset against future taxable profits. These losses are
timebound, and £13.5 million will expire after five years if unused.
There are no deferred tax liabilities associated with undistributed earnings of subsidiaries due to the availability of tax credits
against such liabilities or the exemption from UK tax on such dividends.
Temporary differences arising in connection with interests in associates are insignificant.
24. LEASES
The Group leases assets including land and buildings and plant and machinery that are held within property, plant and
equipment. Information about leases for which the Group is a lessee is presented below.
Analysis of property, plant and equipment relating to leases
The Group has split the net book value of property, plant and equipment relating to leases between amounts previously
recognised as finance leases under IAS 17 and amounts recognised as right-of-use assets under IFRS 16. This allows
management to review performance excluding IFRS 16, as set out in Note 36, Alternative performance measures.
£ million
25 December
2021
26 December
2020
Net book value of leased property, plant and equipment excluding right-of-use assets 2.8 3.4
Net book value of right-of-use assets 73.2 71.7
76.0 75.1
Net book value of right-of-use assets
£ million
Land and
buildings
Plant and
machinery Total
Balance at 29 December 2019 70.6 2.8 73.4
Additions 10.2 2.0 12.2
Depreciation charge (9.7) (1.7) (11.4)
Impairment for the period (2.3) – (2.3)
Exchange differences (0.2) – (0.2)
At 26 December 2020 68.6 3.1 71.7
Additions 12.8 1.4 14.2
Depreciation charge (9.8) (1.6) (11.4)
Impairment for the period (1.3) – (1.3)
At 25 December 2021 70.3 2.9 73.2
FINANCIAL STATEMENTS
185
Bakkavor Group plc
Annual Report & Accounts 2021
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
Lease liabilities
Present value of
minimum lease payments
£ million
25 December
2021
26 December
2020
Amounts payable under leases:
Within one year 10.8 11.1
In the second to fifth years inclusive 29.3 27.9
Over five years 44.5 43.0
Present value of lease obligations 84.6 82.0
Analysed as:
Amount due for settlement within 12 months 10.8 11.1
Amount due for settlement after 12 months 73.8 70.9
84.6 82.0
The Group has split the lease liabilities between liabilities previously recognised as finance leases under IAS 17 and liabilities
recognised under IFRS 16. This allows management to review both the Group net debt, as set out in Note 21, Borrowings, and
the Group operational net debt as set out in Note 36, Alternative performance measures.
£ million
25 December
2021
26 December
2020
Lease liabilities relating to leases previously recognised under IAS 17 1.0 1.6
Lease liabilities relating to leases recognised under IFRS 16 83.6 80.4
84.6 82.0
The weighted average lease term outstanding is 14.8 years (2020: 15.4 years). For 2021, the weighted average incremental
borrowing rate was 3.32% (2020: 3.41%). 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 Group’s lease obligations are secured by the lessors’ rights over the leased assets.
The Group utilises the exemption from capitalising short-term and low-value leases where the relevant criteria are met.
The expenses relating to these lease types are disclosed below.
Amounts recognised in the consolidated income statement
£ million 2021 2020
Interest on lease liabilities 2.7 2.7
Expenses relating to low-value leases 2.2 2.4
Expenses relating to short-term leases 0.9 0.7
5.8 5.8
Amounts recognised in the statement of cash flows
£ million 2021 2020
Cash outflow for lease principal payments 11.7 11.4
Cash outflow for lease interest payments 2.7 2.7
Total cash outflow for leases 14.4 14.1
25. TRADE AND OTHER PAYABLES
£ million
25 December
2021
26 December
2020
Trade payables 237.6 227.9
Other taxation 2.1 1.9
Other payables 21.5 20.9
Accruals and deferred income 129.6 116.9
Trade and other payables due within one year 390.8 367.6
Trade payables and accruals principally comprise amounts outstanding for trade purchases and ongoing costs. The average
credit period taken for trade purchases is 62 days (2020: 59 days). No interest is incurred against trade payables.
The Directors consider that the carrying amount of trade payables approximates to their fair value.
During 2019, the Group set up an arrangement to provide financing for the Group’s suppliers. This is a voluntary programme that
potentially gives suppliers earlier access to cash. At 25 December 2021, trade payables amounting to £31.6 million (2020: £27.9 million)
were subject to these arrangements. These balances are classified as trade payables, and the related payments as cash flows from
operating activities since the original obligation to the supplier remains and has not been replaced with a new obligation to the bank.
Other payables include the Group’s liabilities in respect of payroll taxes.
24. LEASES CONTINUED
186
Bakkavor Group plc
Annual Report & Accounts 2021
26. PROVISIONS
£ million
Onerous
contracts
Dilapidation
provisions
Legal and other
provisions
Restructuring
provisions Total
At 29 December 2019 1.9 15.9 1.7 0.8 20.3
Utilisation of provision (0.5) (1.4) (0.2) (4.4) (6.5)
Additional provision in the year 0.7 3.5 5.1 4.8 14.1
Release of provision (0.9) (1.5) (0.2) – (2.6)
Unwinding of discount – 0.1 – – 0.1
At 26 December 2020 1.2 16.6 6.4 1.2 25.4
Included in current liabilities 0.1 3.6 6.4 0.9 11.0
Included in non-current liabilities 1.1 13.0 – 0.3 14.4
At 26 December 2020 1.2 16.6 6.4 1.2 25.4
Utilisation of provision (0.4) (0.2) (0.9) (0.5) (2.0)
Additional provision in the year 1.1 – 0.5 – 1.6
Release of provision (0.1) – (2.1) (0.2) (2.4)
Unwinding of discount – 0.2 – – 0.2
At 25 December 2021 1.8 16.6 3.9 0.5 22.8
Included in current liabilities 0.2 4.3 3.9 0.1 8.5
Included in non-current liabilities 1.6 12.3 – 0.4 14.3
Onerous contracts provisions brought forward from the end of 2020 relate to the Group’s leased vacant properties. During the
year an additional onerous contract provision of £1.1 million (2020: £0.7 million) was made in respect of one of the Group’s
vacant properties. The onerous contract has been calculated as the discounted total expected costs for occupying the property
(including service charges but excluding lease rentals and rates) through to the break clause. The provisions will be utilised
over the term of the individual leases to which they relate. These leases expire within 9 to 18 years.
Dilapidation provisions relate to estimated 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, which range from 1 to 29 years.
The legal and other provisions, which are expected to be settled within 12 months and have decreased by £2.5 million in the year
(2020: increased by £4.7 million in the year), are assessed by utilising Group experience, legal and professional advice and other
commercial factors to reasonably estimate present obligations across the Group. These obligations are varied and depend on
future events which are by their nature uncertain. The Group has taken this uncertainty into account and considers the provision
to be reasonable in the circumstances. The Group is also subject to a National Living Wage enquiry, which has been ongoing
since July 2017. The Directors have assessed and provided for the potential liability that may arise from the enquiry and this is
included in legal and other provisions above.
Restructuring provisions at the end of 2020 related to the closure costs in respect of the Group’s non-core UK fast casual
restaurant business and site closures during 2020.
27. 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 21, 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 of less than 50%. This 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
25 December
2021
26 December
2020
Debt (excluding IFRS 16 lease liabilities) 321.6 356.2
Cash and cash equivalents (31.1) (24.8)
Net debt 290.5 331.4
Equity 640.7 598.1
Net debt to net debt plus equity 31.2% 35.7%
FINANCIAL STATEMENTS
187
Bakkavor Group plc
Annual Report & Accounts 2021
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
Debt is defined as long and short-term borrowings, as disclosed in Note 21 and lease liabilities payable in Note 24 (excluding
IFRS 16 lease liabilities of £83.6 million at 25 December 2021 (£80.4 million at 26 December 2020)).
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
25 December
2021
26 December
2020
Financial assets
Fair value through profit and loss:
Trade receivables 53.8 56.6
Derivative financial instruments 2.9 0.6
Measured at amortised cost:
Trade receivables 61.6 57.0
Other receivables 17.2 14.9
Cash and cash equivalents 31.1 24.8
166.6 153.9
£ million
25 December
2021
26 December
2020
Financial liabilities
Fair value through profit and loss:
Derivative financial instruments 2.1 1.8
Other financial liabilities at amortised cost:
Trade payables 237.6 227.9
Other payables 21.5 20.9
Accruals 128.4 115.7
Borrowings 320.6 354.6
Lease liabilities 84.6 82.0
794.8 802.9
The fair value of financial assets approximates to their carrying value due to the short-term nature of the receivables. Fair
values for the derivative financial instruments and other payables have been determined as level 2 under IFRS 7 Financial
Instruments: Disclosures. Quoted prices are not available for the derivative financial instruments and so valuation models are
used to estimate fair value. The models calculate the expected cash flows under the terms of each specific contract and then
discount these values back to a present value. These models use as their basis independently sourced market parameters
including, for example, interest rate yield curves and currency rates.
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 lease liabilities fair value approximates to the
carrying value based on discounted future cash flows.
There have been no changes to fair values as a result of a change in credit risk of the Group or the Group’s customers.
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 and mitigate against these risks where possible, and
does this by constantly monitoring and using a range of measures including 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.
27. FINANCIAL INSTRUMENTS CONTINUED
188
Bakkavor Group plc
Annual Report & Accounts 2021
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:
• Interest rate swaps to mitigate the risk of rising interest rates; and
• Forward foreign exchange contracts to hedge the exchange rate risk arising on purchases in foreign currencies.
Market risk exposures are supplemented by sensitivity analysis. There has been no change in the Group’s exposure to market
risks or the manner in which it manages and measures the risk.
Foreign currency risk management
Foreign currency risk management occurs at a transactional level on 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 25 December 2021, the Euro weakened against Sterling by 6.6% (2020: strengthened by 5.1%), with
the closing rate at €1.1850 compared with €1.1113 at the prior period end. The average rate for the 52-week period to 25December
2021 was €1.1623 (2020: €1.1256), a 3.3% weakening (2020: 1.4% strengthening) of the Euro versus the prior period.
In the same period, the US dollar strengthened against Sterling by 1.0% (2020: weakened by 3.4%), with the closing rate at
$1.3404 compared with $1.3534 at the prior period end. The average rate for the 52-week period to 25 December 2021 was
$1.3753 (2020: $1.2831), a 7.2% weakening (2020: 0.4% weakening) of the US dollar versus the prior period.
The net foreign exchange impact on profit from transactions is a gain of £0.5 million (2020: loss of £0.2 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 as it 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/equity where Sterling
strengthens 10% against the relevant currency.
Profit or (loss)
10% strengthening in currency
Profit or (loss)
10% weakening in currency
£ million
25 December
2021
26 December
2020
25 December
2021
26 December
2020
Euro 1.9 2.4 (2.3) (2.9)
USD 0.3 (0.9) (0.4) 1.1
HKD (0.2) (0.1) 0.3 0.2
RMB (0.7) (0.7) 0.8 0.8
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 and cash flow exposures associated with anticipated
purchase transactions.
As of 27 December 2020, the Group has applied hedge accounting to its forward contracts that were put in place on or after this
date. The transactions and forward contracts are designated with a hedge ratio of 1:1. The fair value of forward contracts at the
reporting date is determined by the difference between foreign currency spot rate and strike rate of the contract, discounted to
present value. Sources of hedge ineffectiveness are a reduction or modification in the hedged item or a material change in the
credit risk of contract counterparties.
FINANCIAL STATEMENTS
189
Bakkavor Group plc
Annual Report & Accounts 2021
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
The following table details Sterling foreign currency contracts outstanding as at 25 December 2021, which were entered into on
or before 26 December 2020, for which hedge accounting is not applied:
Foreign currency
(million)
Average
exchange rate
Contract value
(£ million)
Fair value movement
(£ million)
Outstanding contracts 2021 2020 2021 2020 2021 2020 2021 2020
Net Euros:
3 months or less 8.0 28.7 1.10 1.11 7.2 25.7 (0.5) 0.1
3 to 6 months 6.0 27.6 1.11 1.13 5.4 24.7 (0.3) 0.1
6 to 12 months – 28.5 – 1.11 – 25.7 – 0.1
Over 12 months – 14.0 – 1.10 – 12.6 – 0.0
Net US dollars:
3 months or less 1.5 6.5 1.33 1.30 1.2 5.0 – (0.2)
3 to 6 months – 5.0 – 1.31 – 3.8 – (0.1)
6 to 12 months – 7.5 – 1.33 – 5.7 – (0.2)
Over 12 months – 1.5 – 1.34 – 1.2 – (0.0)
13.8 104.4 (0.8) (0.2)
The following table details Sterling foreign currency contracts outstanding as at 25 December 2021, which were entered into on
or after 27 December 2020, for which hedge accounting is applied:
Foreign currency
(million)
Average
exchange rate
Contract value
(£ million)
Fair value movement
(£ million)
Outstanding contracts 2021 2020 2021 2020 2021 2020 2021 2020
Net Euros:
3 months or less 20.8 – 1.16 – 18.0 – (0.4) –
3 to 6 months 22.2 – 1.16 – 19.1 – (0.3) –
6 to 12 months 31.4 – 1.16 – 27.2 – (0.4) –
Over 12 months 12.0 – 1.16 – 10.3 – 0.0 –
Net US dollars:
3 months or less 4.8 – 1.35 – 3.6 – 0.1 –
3 to 6 months 4.7 – 1.35 – 3.5 – 0.0 –
6 to 12 months 9.4 – 1.35 – 7.0 – 0.0 –
Over 12 months 1.7 – 1.36 – 1.3 – 0.0 –
90.0 – (1.0) –
The following tables detail various information regarding forward contracts, for which hedge accounting is applied, outstanding
at the end of the reporting period and their related hedged items.
Average contracted
exchange rate
Contract
value
Carrying amount
of the hedging
instrument assets/(liabilities)
Change in fair value
used for calculating
hedge ineffectiveness
Hedging instruments 2021 2020
2021
£ million
2020
£ million
2021
£ million
2020
£ million
2021
£ million
2020
£ million
Forward contracts – EURO 1.16 – 74.6 – (1.1) – (1.1) –
Forward contracts – USD 1.35 – 15.4 – 0.1 – 0.1 –
Nominal amount of the hedged
item (liabilities)
Change in value used
for calculating
hedge ineffectiveness
Balance in cash flow
hedge reserve for
continuing hedges
Balance in cash flow hedge
reserve arising from hedging
relationships for which hedge
accounting is no longer applied
Hedged items
2021 Foreign
currency
million
2020 Foreign
currency
million
2021
£ million
2020
£ million
2021
£ million
2020
£ million
2021
£ million
2020
£ million
Foreign currency purchases – EURO 86.4 – 1.1 – (1.1) – – –
Foreign currency purchases – USD 20.6 – (0.1) – 0.1 – – –
27. FINANCIAL INSTRUMENTS CONTINUED
190
Bakkavor Group plc
Annual Report & Accounts 2021
The following table details the effectiveness of the hedging relationship and the amounts reclassified from hedging reserve:
Current period
hedging losses
recognised in OCI
Amount of hedge
ineffectiveness
recognised in
profit or loss
Line item in
the income
statement in
which hedge
ineffectiveness
is included
Due to hedged future
cash flows being no
longer expected to occur
Line item
in which
reclassification
adjustment
is included
Hedged items
2021
£ million
2020
£ million
2021
£ million
2020
£ million
2021
£ million
2020
£ million
Foreign currency purchases (1.0) – – –
Other gains
and losses – – Inventory
Interest rate risk management
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 and caps to
minimise the risk associated with variable interest rates. Hedging activities are evaluated regularly to align with interest rate
views and defined risk appetite, ensuring the most cost-effective hedging strategies are applied. 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, as these are management’s
assessment of reasonably possible changes in interest rates.
£ million
(Loss)/profit
25 December 2021
(Loss)/profit
26 December 2020
Effects of 100 basis points increase in interest rate (1.8) (1.8)
Effects of 100 basis points decrease in interest rate 0.1 0.1
It is assumed that all other variables remain the same when preparing the interest rate sensitivity analysis.
Interest rate swap contracts
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 cash flow exposures
on the issued variable rate debt held. The fair value of interest rate swaps at the reporting date is determined by discounting
the future cash flows using the curves at the reporting date and the credit risk inherent in the contract is disclosed below. The
average interest rate is based on the outstanding balances at the end of the financial year. The £150 million of the floating debt
is designated with quarterly interest payment dates and is offset by an interest rate swap with the same critical terms, with a
designated hedge ratio of 1:1. Sources of hedge ineffectiveness are a reduction or modification in the hedged item or a material
change in the credit risk of swap counterparties.
As the critical terms of the interest rate swap contracts and their corresponding hedged items are the same, the Group
performs a qualitative assessment of effectiveness and it is expected that the value of the interest rate swap contracts and
the value of the corresponding hedged items will systematically change in the opposite direction in response to movements
in the underlying interest rates.
During the year the Group transitioned from LIBOR to SONIA, as described in Note 1. All of the interest rate swaps amounting
to £150.0 million were subject to this transition.
The following tables detail various information regarding interest rate swap contracts outstanding at the end of the reporting
period and their related hedged items.
Average contracted
fixed interest rate
Notional principal
value
Carrying amount
of the hedging
instrument assets/(liabilities)
Change in fair value used
for calculating hedge
ineffectiveness
Hedging instruments
2021
%
2020
%
2021
£ million
2020
£ million
2021
£ million
2020
£ million
2021
£ million
2020
£ million
Interest rate swaps 0.4 0.4 150.0 150.0 2.5 (0.9) 3.4 (0.9)
Nominal amount of the
hedged item (liabilities)
Change in value used
for calculating hedge
ineffectiveness
Balance in cash flow
hedge reserve for
continuing hedges
Balance in cash flow hedge
reserve arising from hedging
relationships for which hedge
accounting is no longer applied
Hedged items
2021
£ million
2020
£ million
2021
£ million
2020
£ million
2021
£ million
2020
£ million
2021
£ million
2020
£ million
Variable rate borrowings (150.0) (150.0) (3.4) 0.9 2.5 (0.9) – –
FINANCIAL STATEMENTS
191
Bakkavor Group plc
Annual Report & Accounts 2021
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
The following table details the effectiveness of the hedging relationship and the amounts reclassified from hedging reserve to
income statement:
Amount reclassified to income statement
Current period hedging gains/
(losses) recognised in OCI
Amount of hedge
ineffectiveness recognised
in profit or loss
Line item in
the income
statement in
which hedge
ineffectiveness
is included
Due to hedged future
cash flows being no longer
expected to occur
Line item
in income
statement
in which
reclassification
adjustment
is included
Hedged items
2021
£ million
2020
£ million
2021
£ million
2020
£ million
2021
£ million
2020
£ million
Variable rate borrowings 3.4 (0.9) – –
Other gains
and losses – –
Finance
costs
When interest amounts are paid or received on its interest rate swap contracts, the Group recognises the expenses or income in
the income statement. During 2021 the net amount paid and recognised as expenses in finance costs was £0.4 million (2020: £0.2
million). After payment or receipt the hedge is revalued and movements are recognised as a movement in the hedging reserve.
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 financial
assets measured 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,
represent more than 74% (2020: 75%) of the Group’s revenue from continuing operations. These customers have favourable
credit ratings and consequently reduce the credit risk for the Group’s overall trade receivables.
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.
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 committed
bank facilities. The Group’s current bank facilities comprise a £225.0 million term loan (2020: £282.5 million) and a £230.0
million RCF facility (2020: £230.0 million), through a bank syndicate. Coöperatieve Rabobank U.A. is the syndicate agent of this
facility and it manages the syndicate and participation with other counterparties.
The maximum exposure to credit risk for trade and other receivables at the reporting date by geographic region of origin was:
£ million
25 December
2021
26 December
2020
UK 104.2 105.9
US 12.4 8.9
China 16.0 13.7
132.6 128.5
The expected credit losses on trade receivables are calculated locally by financial teams. These allowances are based on
assumptions about the risk of default (when it is reasonably probable that no future economic benefit will arise from the
financial asset) and expected loss rates. The Group uses judgement in making these assumptions with regards to customer
credit ratings, credit risk characteristics and the days past due based on the Group’s history and existing market conditions.
Generally, the expected credit loss becomes 100% of the trade receivable once it is past due by 91 days; as at 25 December 2021
there were £0.4 million (2020: £1.7 million) of trade receivables past due by 91 days. This figure has been included in the
expected credit loss of £2.8 million (2020: £1.6 million). The Group will generally write-off any trade receivables relating to
customers that are in administration.
Commodity risk management
The Group acquires substantial quantities of raw materials for its operations. The Group is therefore 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. It also frequently
tenders to benchmark market prices. In general, requirements are managed using contracts for periods of between three to
twelve months forward. The Group also manages any local currency exposure in line with agreed contracts. As at 25 December
2021, the Group had purchase commitments for the next 12 months to guarantee supply and price of raw materials of £141.5
million (2020: £136.4 million).
27. FINANCIAL INSTRUMENTS CONTINUED
192
Bakkavor Group plc
Annual Report & Accounts 2021
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 to ensure that adequate liquidity is available to meet the maturity
profiles of financial 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 funding is available for the Group’s day-to-day
needs. The Group maintains reasonable headroom of unused committed bank facilities in a range of maturities at least 12
months beyond the period end. As at 25 December 2021, the Group has undrawn borrowing facilities, including cash, available
totalling £195.1 million (2020: £204.1 million). Please see Note 21 for further information regarding the Group’s borrowings.
Maturity profile of financial liabilities
The following table illustrates the Group’s undiscounted contractual maturity for its undiscounted financial liabilities when they
fall due.
£ million
25 December
2021
26 December
2020
Non-derivatives due within one year:
Trade payables 237.6 227.9
Other payables 21.5 20.9
Accruals 128.4 115.7
Borrowings 11.2 34.3
Lease liabilities 13.3 13.6
Total non-derivatives due within one year 412.0 412.4
Non-derivatives due in the second to fifth years inclusive:
Borrowings 324.9 344.2
Lease liabilities 36.5 35.0
Total non-derivatives due in the second to fifth years 361.4 379.2
Non-derivatives due after five years:
Borrowings 11.8 12.1
Lease liabilities 58.2 57.5
Total non-derivatives due after five years 70.0 69.6
The weighted average interest rates for the Group’s borrowings are found in Note 21 and in Note 24 for lease liabilities.
The following table illustrates the Group’s contractual maturity for derivative financial instruments when they fall due.
£ million
25 December
2021
26 December
2020
Derivative financial liabilities
Due within one year 1.7 0.9
Due in the second to fifth years inclusive 0.4 0.9
Total 2.1 1.8
Items of income, expense, gains or losses
The following table provides an analysis of the Group’s investment revenue, finance costs and changes in fair values by category
of financial instrument:
£ million 2021 2020
Finance costs
On financial liabilities held at amortised cost (17.1) (21.0)
Changes in fair values recognised in Other gains and (losses)
On financial liabilities held at fair value through profit and loss (4.0) 3.4
28. CALLED UP SHARE CAPITAL, DIVIDENDS AND RESERVES
Called up share capital
£ million
25 December
2021
26 December
2020
Issued and fully paid:
579,425,585 (2020: 579,425,585) Ordinary shares of £0.02 each 11.6 11.6
All Ordinary shares of £0.02 each are non-redeemable, and carry equal voting rights and rank for dividends and capital
distributions, whether on a winding up or otherwise.
FINANCIAL STATEMENTS
193
Bakkavor Group plc
Annual Report & Accounts 2021
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
Dividends
As a result of the COVID-19 pandemic and its impact on the business during 2020 the Board did not declare any dividends for the
financial year ended 26 December 2020.
At the AGM on 20 May 2021, a deferred final dividend of 4 pence per Ordinary share for the financial year ended 28 December
2019 was re-instated and declared. The total amount of £23,177,023 was paid to Ordinary shareholders on 25 May 2021.
An interim dividend of 2.64 pence per Ordinary share was declared in September 2021. The total amount of £15,296,835 was paid to
Ordinary shareholders on 15 October 2021. This has resulted in total dividend payments of £38,473,858 (2020: £nil) during the year.
A final dividend of 3.96 pence per share has been proposed for approval at the Annual General Meeting on 25 May 2022 and will
be payable on 30 May 2022 to Ordinary shareholders on the register at 29 April 2022.
Merger reserve
The merger reserve was created as a result of the acquisition of Bakkavor Holdings Limited and represents the difference
between the carrying values of the net assets of Bakkavor Holdings Limited and the value of the share capital and share
premium arising on the share for share exchange that resulted in Bakkavor Group plc acquiring Bakkavor Holdings Limited.
In 2007, a corporate reorganisation was completed to establish Bakkavor Holdings Limited as an intermediate holding company
of the Group. This was accounted for using the principles of merger accounting.
In 2017, the merger reserve was debited by £185.8 million as a result of the acquisition of Bakkavor Holdings Limited and the
elimination of the historical capital reserve which related to the previous Group structure.
Hedging reserve
The hedging reserve represents the cumulative amount of gains and losses on hedging instruments deemed effective in cash
flow hedges. The cumulative deferred gain or loss on the hedging instrument is recognised in profit or loss only when the
hedged transaction impacts the profit or loss, or is included directly in the initial cost or other carrying amount of the hedged
non-financial items (basis adjustment).
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.
29. NET CASH GENERATED FROM OPERATING ACTIVITIES
£ million 2021 2020
Operating profit 102.0 62.0
Adjustments for:
Share of results of associates after tax (0.3) (0.1)
Depreciation of property, plant and equipment 65.2 66.1
Amortisation of intangible assets 0.5 0.5
(Profit)/loss on disposal of property, plant and equipment (2.9) 0.9
Impairment of assets 1.3 19.1
Share scheme charges 1.7 1.2
Net retirement benefits charge less contributions (1.4) (1.1)
Operating cash flows before movements in working capital 166.1 148.6
(Increase)/decrease in inventories (7.0) 0.7
(Increase) in receivables (6.2) (5.1)
Increase/(decrease) in payables 18.5 (22.6)
(Decrease)/increase in provisions (2.9) 4.9
Cash generated by operations 168.5 126.5
Income taxes paid (6.5) (16.5)
Interest paid (18.0) (21.5)
Net cash generated from operating activities 144.0 88.5
28. CALLED UP SHARE CAPITAL, DIVIDENDS AND RESERVES CONTINUED
194
Bakkavor Group plc
Annual Report & Accounts 2021
Analysis of changes in net debt
£ million
27 December
2020 Cash flow
Lease
additions
Exchange
movements
Other non-cash
movements
1
25 December
2021
Borrowings (354.6) 32.8 – – 1.2 (320.6)
Lease liabilities (82.0) 11.7 (14.2) (0.1) – (84.6)
Total liabilities from financing activities (436.6) 44.5 (14.2) (0.1) 1.2 (405.2)
Cash and cash equivalents 24.8 6.1 – – 0.2 31.1
Net debt (411.8) 50.6 (14.2) (0.1) 1.4 (374.1)
1 Includes accrued interest at 25 December 2021 of £0.2 million (2020: £2.3 million) and prepaid bank fees of £3.4 million (2020: £4.3 million). The movement in these balances in the period
of £1.2 million is shown in the table above as ‘Other non-cash movements’ in Borrowings.
30. 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; please see Note 26 for further details about legal provisions.
The Group has the following amounts of letters of credit issued:
£ million
25 December
2021
26 December
2020
Letters of credit 1.0 1.3
As at 25 December 2021, the Group had purchase commitments for the next 12 months to guarantee supply and price of raw
materials of £141.5 million (2020: £136.4 million).
31. SHAREBASED PAYMENTS
The Company has a share option scheme for selected employees of the Group. Options granted under the scheme are
exercisable at a discount to the estimated price of the Company’s shares on the date of grant. Options expire if they remain
unexercised after a period of 5 or 10 years from the date of grant dependent on the award year. Options may be forfeited if the
employee leaves the Group before the options vest.
Details of the share options outstanding during the year were as follows:
Number of share options Weighted average exercise price
25 December
2021
26 December
2020
25 December
2021
26 December
2020
Outstanding at the beginning of the period 17,016,003 15,236,588 £0.18 £0.40
Granted during the period 4,094,843 7,598,464 – –
Granted in lieu of dividends during the period 15,884 – – –
Exercised during the period (1,204,191) – £0.70 –
Forfeited during the period (98,773) (1,842,936) – –
Expired and lapsed during the period (2,109,913) (3,976,113) – £0.76
Outstanding at the end of the period 17,713,853 17,016,003 £0.12 £0.18
Exercisable at the end of the period 3,613,752 3,976,114 £0.45 £0.67
The average share price on the date options were exercised during the period was £1.29 (2020: no options exercised).
The options outstanding at 25 December 2021 had a weighted average exercise price of £0.12 (2020: £0.18), and a weighted
average remaining contractual life of 7.9 years (2020: 8.3 years).
Range of exercise prices for the share options:
Number of share options Weighted average exercise price
25 December
2021
26 December
2020
25 December
2021
26 December
2020
£nil 13,839,628 12,039,889 – –
£0.01 – £1.00 3,874,225 4,976,114 £0.57 £0.61
Outstanding at the end of the period 17,713,853 17,016,003 £0.12 £0.18
Exercisable at the end of the period 3,613,752 3,976,114 £0.45 £0.67
In 2021, 157,594 options were granted on 27 January 2021 under the same terms as the options granted in October 2020.
Further, 3,770,227 options were granted on 26 April 2021 and 4 May 2021, with a further 167,022 options granted on 14
September 2021. These options granted had the following performance conditions for vesting:
• 136,823 vest provided that the individual is an employee in May 2024.
• Provided that the first condition is met, 12.5% of the remaining options vest provided the Group’s TSR national rank versus a bespoke
peer group of 27 companies three years after the date of grant is at the median level. This increases up to 50% of the remaining
options based on a sliding scale if the Group’s TSR rank three years after the date of grant is at the upper quartile level.
FINANCIAL STATEMENTS
195
Bakkavor Group plc
Annual Report & Accounts 2021
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
• Provided that the first condition is met, 12.5% of the remaining options vest provided the Group’s Adjusted EPS for the 2023 financial
year is 12.7 pence, with up to a further 50% of the remaining options vesting on a sliding scale if the Group’s Adjusted EPS is between
12.7 pence and 14.7 pence for that year.
In 2020, options were granted on 15 September 2020, 14 October 2020 and 30 October 2020. The options had the following
performance conditions for vesting:
• 628,480 vest provided that the individual is an employee in October 2023.
• Provided that the first condition is met, 25% of the remaining options vest provided the Group’s TSR national rank versus a bespoke
peer group of 29 companies three years after the date of grant is at the median level. This increases up to 100% of the remaining
options based on a sliding scale if the Group’s TSR rank three years after the date of grant is at the upper quartile level.
In 2019, 3,992,846 options were granted on 9 April 2019. The options had the following performance conditions for vesting:
• 314,156 vest provided that the individual is an employee in April 2022.
• Provided that the first condition is met, 12.5% of the remaining options vest provided the Group’s TSR national rank versus a bespoke
peer group of 34 companies at 25 December 2021 is at the median level. This increases up to 50% of the remaining options based on
a sliding scale if the Group’s TSR rank at 25 December 2021 is at the upper quartile level.
• Provided that the first condition is met, 12.5% of the remaining options vest provided the Group’s Adjusted EPS for the 2021 financial
year is 16.5 pence, with up to a further 50% of the remaining options vesting on a sliding scale if the Group’s Adjusted EPS is between
16.5 pence and 18.6 pence for that year.
In 2018, 2,842,686 options were granted on 9 April 2018 of which 139,527 had vested at 25 December 2021 with the remaining
options having now expired.
In 2017, options were granted on 3 July 2017 and 20 October 2017. 3,474,225 of these options had vested but not been exercised
at 25 December 2021 with a further 400,000 due to vest in 2022 provided that the employee is employed by the business at the
vesting date.
The aggregate of the estimated fair values of the options granted as at 2021 is £22.4 million (2020: £14.1 million).
The following table summarises the options granted by the Company:
Date of grant
Number of
options
originally
granted
Contractual
life remaining
(years)
Share price at
date of grant
Expected
volatility
Expected
life remaining
(years) Risk-free rate
Expected
dividend yield
Fair value
per option
3 July 2017 8,178,785 5.5 £1.44 38.2% – 0.87% 2.75% £0.65
20 October 2017 600,000 5.8 £1.44 37.5% – 0.47% 2.75% £1.34
20 October 2017 400,000 5.8 £1.44 37.7% 0.3 0.56% 2.75% £1.26
9 April 2018 1,312,855 6.3 £1.78 24.5% – 0.91% 0.00% £0.94
9 April 2018 1,312,855 6.3 £1.78 23.5% – 1.17% 0.00% £1.78
9 April 2018 216,976 6.3 £1.78 N/A – N/A 0.00% £1.78
9 April 2019 1,839,345 7.3 £1.33 31.0% 0.3 0.69% 0.00% £0.59
9 April 2019 1,839,345 7.3 £1.33 31.0% 0.3 0.69% 0.00% £1.33
9 April 2019 314,156 7.3 £1.33 31.0% 0.3 0.69% 0.00% £1.33
15 September 2020 1,118,051 8.7 £0.68 35.7% 1.7 (0.10%) 0.00% £0.42
14 October 2020 5,497,110 8.8 £0.65 35.7% 1.8 (0.09%) 0.00% £0.40
14 October 2020 451,069 8.8 £0.65 35.7% 1.8 (0.09%) 0.00% £0.64
30 October 2020 354,823 8.9 £0.59 35.7% 1.8 (0.07%) 0.00% £0.34
30 October 2020 177,411 8.9 £0.59 35.7% 1.8 (0.07%) 0.00% £0.58
27 January 2021 157,594 9.1 £0.59 35.7% 2.1 (0.07%) 0.00% £0.34
26 April 2021 1,333,857 9.3 £1.36 41.5% 2.3 0.16% 0.00% £1.08
26 April 2021 1,333,857 9.3 £1.36 43.7% 2.3 0.33% 0.00% £1.30
26 April 2021 482,845 9.3 £1.36 41.5% 2.3 0.16% 0.00% £1.08
26 April 2021 482,845 9.3 £1.36 43.7% 2.3 0.33% 0.00% £1.30
26 April 2021 136,823 9.3 £1.36 43.7% 2.3 0.33% 0.00% £1.30
14 September 2021 83,511 9.7 £1.29 42.0% 2.7 0.21% 0.00% £1.01
14 September 2021 83,511 9.7 £1.29 42.0% 2.7 0.21% 0.00% £1.24
The Group has used the Monte Carlo model to value its share awards. The exercise price used in the model for share options
granted in 2021 is £nil (2020: £nil). The fair value of awards, which have a TSR performance condition, takes account of the
likelihood of meeting these targets.
31. SHAREBASED PAYMENTS CONTINUED
196
Bakkavor Group plc
Annual Report & Accounts 2021
The expected volatility is a measure of the amount by which a share price is expected to fluctuate during the period. It is typically
calculated based on statistical analysis of daily share prices over the length of the award period. Bakkavor Group plc listed in
November 2017 and as such historical information is not available. Instead, the expected volatility has been based on the average
volatility of a peer group of companies, which are of a similar size and operate in a similar market to Bakkavor Group plc.
The Group recognised total expenses of £2.3 million (2020: £1.2 million) related to equity-settled share-based payment
transactions in the period. The Group held cash-settled share-based awards of £0.6 million (2020: £nil) during the year.
32. 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 Bakkavor Pension Scheme, which is a funded defined benefit scheme that provides benefits on a final salary
basis and was closed to future accrual in March 2011.
UK pensions are regulated by the Pensions Regulator whose statutory objectives and regulatory powers are described on its
website www.thepensionsregulator.gov.uk. Although the Company bears the financial cost of the plan, the trustee directors are
responsible for the overall management and governance of the scheme, including compliance with all applicable legislation and
regulations. The trustee directors are required by law to act in the interests of all relevant beneficiaries and to set certain
policies; to manage the day-to-day administration of the benefits; and to set the plan’s investment strategy following
consultation with the Parent Company.
Pension costs charged in arriving at profit on ordinary activities before taxation were:
£ million 2021 2020
UK defined contribution scheme net charge 11.1 11.2
UK defined benefit scheme net charge 1.1 1.5
Total charge 12.2 12.7
Defined contribution schemes
The total cost charged to income of £11.1 million (2020: £11.2 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. Included
in accruals was £2.3 million at the period end for the defined contribution schemes gross contributions (2020: £2.0 million).
Defined benefit schemes
An actuarial valuation of Scheme assets and the present value of the defined benefit obligation for funding purposes was carried
out as at 31 March 2019. The results from this valuation were updated for IAS 19 Employee Benefits purposes to 25 December 2021
by a qualified independent actuary with Willis Towers Watson. The projected unit cost method was used to value the liabilities.
The principal assumptions used in this IAS 19 valuation were:
25 December
2021
26 December
2020
Future pension increases for in-payment benefits (majority of liabilities) 3.25% 2.85%
Discount rate applied to Scheme liabilities 1.80% 1.40%
Inflation assumption (CPI) 2.75% 2.25%
The 2021 mortality table is based on scheme-specific postcode-fitted SAPS 3 tables with a 107% multiplier for male members
and a 110% multiplier for female members. Future improvements are in line with the CMI core 2018 improvements model with
an initial addition to improvements of 0.5% p.a. and a 1.25% p.a. long-term trend from 2013 onwards, giving life expectancies
as follows:
Males’ expected
future lifetime
2021
Males’ expected
future lifetime
2020
Females’
expected future
lifetime
2021
Females’
expected future
lifetime
2020
Member aged 45 41.3 41.1 43.8 43.7
Member aged 65 21.8 21.7 23.8 23.8
The IAS 19 calculations, which are based on an approximate update of the results of the actuarial valuation of the Scheme which
was carried out as at 31 March 2019, are particularly sensitive to some assumptions: for example, the discount rate, the level of
assumed price inflation and the life expectancy assumption. As such, a broad indication of the sensitivity of the liabilities to each
assumption is shown. The sensitivities display ‘reasonably possible’ changes in actuarial assumptions. The sensitivities
regarding the principal assumptions used to measure the scheme liabilities are set out below:
FINANCIAL STATEMENTS
197
Bakkavor Group plc
Annual Report & Accounts 2021
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
Assumption Change in assumption Approximate impact on scheme liabilities
Discount rate Increase/decrease by 1.0% Decrease £46.8 million/increase £61.2 million
Rate of inflation Increase/decrease by 0.5% Increase £19.5 million/decrease £19.3 million
Life expectancy Members assumed to be one year younger than their actual age Increase £11.3 million
Amounts recognised in income in respect of these defined benefit schemes are as follows:
£ million 2021 2020
Past service cost 0.1 0.6
Net interest on net defined benefit asset/liability (0.2) (0.2)
Administration costs incurred during the period 1.2 1.1
Total charge 1.1 1.5
All of the charges for each period presented have been included in total administrative expenses. The actuarial gain of
£24.5 million (2020: £0.4 million gain) has been reported in other comprehensive income.
The actual return on Scheme assets was an increase of £25.6 million (2020: £31.3 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
25 December
2021
26 December
2020
Fair value of Scheme assets 313.5 294.7
Present value of defined benefit obligations (276.3) (283.5)
Scheme surplus 37.2 11.2
Related deferred taxation liability (Note 23) (9.3) (2.1)
27.9 9.1
The assumptions used 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.
The Scheme surplus in 2021 is recognised in accordance with IFRIC 14 IAS 19 – The Limit on a Defined Benefit Asset, Minimum
Funding Requirements and their interaction, as the Scheme’s terms and conditions allow the Group to have an unconditional
right to a refund of contributions when economic benefits are available.
The amounts recognised in the balance sheet and the movements in the net defined benefit obligation (“DBO”) over the year are
as follows:
£ million
Present value
of DBO
Fair value of
Scheme assets Net amount
At 29 December 2019 (264.4) 274.1 9.7
Past service cost – plan amendments (0.6) – (0.6)
Interest (expense cost on the DBO)/income on Scheme assets (4.6) 4.8 0.2
Administrative costs paid – (1.1) (1.1)
Total amount recognised in the consolidated income statement (5.2) 3.7 (1.5)
Return on Scheme assets greater/(less) than discount rate – 26.5 26.5
Actuarial loss – financial assumptions (26.1) – (26.1)
Total amount recognised in other comprehensive income (26.1) 26.5 0.4
Contributions from the sponsoring companies – 2.6 2.6
Benefits paid from Scheme assets 12.2 (12.2) –
At 26 December 2020 (283.5) 294.7 11.2
Past service cost – plan amendments (0.1) – (0.1)
Interest (expense cost on the DBO)/income on Scheme assets (3.9) 4.1 0.2
Administrative costs paid – (1.2) (1.2)
Total amount recognised in the consolidated income statement (4.0) 2.9 (1.1)
Return on Scheme assets greater/(less) than discount rate – 21.5 21.5
Actuarial gain – financial assumptions 3.0 – 3.0
Total amount recognised in other comprehensive income 3.0 21.5 24.5
Contributions from the sponsoring companies – 2.6 2.6
Benefits paid from Scheme assets 8.2 (8.2) –
At 25 December 2021 (276.3) 313.5 37.2
32. RETIREMENT BENEFIT SCHEMES CONTINUED
198
Bakkavor Group plc
Annual Report & Accounts 2021
The analysis of the Scheme assets at the statement of financial position date was as follows:
Fair value of assets
£ million
25 December
2021
26 December
2020
Structured UK equity 13.0 16.0
Overseas equity 30.7 28.5
High yield bonds 7.5 17.5
Corporate bonds 74.4 22.1
Government bonds 141.7 157.2
Cash 11.3 15.3
Other 34.9 38.1
313.5 294.7
The fair values of the majority of the equity and bonds have been determined as level 2 instruments under IFRS 7 Financial
Instruments: Disclosures, except for most of the index-linked government bonds, which have quoted prices in active markets
and are classed as level 1.
Structured UK equity provides exposure to UK equities, but is a derivative based solution and not a direct investment in equities.
A proportion of the index-linked government bonds are held as collateral against the structured UK equity product.
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 four multi-asset funds, which invest in a wide range of assets including alternative asset classes. In the
summary above, the multi-asset 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 Trustees on behalf of the
members in accordance with the terms of the Trust Deed and Rules and relevant legislation. The Scheme is subject to Scheme-
specific funding requirements, as outlined in UK legislation. The most recent Scheme-specific funding valuation was as at
31March 2019.
The Group and the Trustees work closely 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 investing broadly 60% in growth-seeking assets
and 40% in liability matching assets, although the proportions can vary significantly in order to allow for advanced liability
hedging techniques, opportunistic allocation of assets and the ‘structured equity’ component of the strategy increases the
notional allocation to return-seeking assets to 95%. A large proportion of both interest and inflation risk is hedged. This 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.
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 2021, an
augmentation of £89,000 was made in respect of this benefit (2020: £125,000).
The current deficit reduction contributions were agreed between the Group and the Trustee as part of the 2019 triennial
valuation. The deficit contributions will be paid over a recovery period ending on 31 March 2024. The recovery contributions are
paid monthly and the agreed rates are £2.5 million per annum. £2.5 million was paid in the period to 25 December 2021 (2020:
£2.5 million).
The actual amount of employer contributions expected to be paid to the Scheme during 2022 is £2.5 million.
FINANCIAL STATEMENTS
199
Bakkavor Group plc
Annual Report & Accounts 2021
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
33. 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 did not enter into any transactions with related parties who are not members of the Group.
Share transactions
See Note 35 for details of share transactions by two of the Company’s Directors, Agust Gudmundsson and Lydur Gudmundsson.
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 for each of the categories specified in IAS 24 Related Party Disclosures.
2021 2020
£ million Directors
Senior
Management Total Directors
Senior
Management Total
Short-term employee benefits 3.8 1.1 4.9 1.9 2.2 4.1
Post-employment benefits
1
– – – – – –
Share-based payments
2
0.5 0.3 0.8 0.1 0.5 0.6
4.3 1.4 5.7 2.0 2.7 4.7
1 The Directors’ post-employment benefits show contributions made to pension schemes. The pension entitlements disclosed in the Directors’ Remuneration Report on page 135 included
cash contributions paid in lieu of pension contributions.
2 This is the income statement charge for the year which represents the fair value of the share-based payments to the Directors and Senior Management. Details of the share-based
payments are set out in Note 31.
The highest paid Director received aggregate remuneration (including pension entitlements) of £1.3 million (2020: £0.7 million).
For the period ended 25 December 2021, two Directors (2020: no Directors) received contributions to their pension schemes
from the Group.
For the period ended 25 December 2021, two Directors (2020: one Director) received share options. No Directors (2020: no
Directors) exercised share options during the period.
34. EVENTS AFTER THE STATEMENT OF FINANCIAL POSITION DATE
On 1 March 2022 the Group agreed a one year extension to the maturity of £430 million of its existing £455 million debt facilities,
to March 2026. The remaining £25 million of facilities retain a maturity date of March 2025.
35. CONTROLLING PARTY
These Financial Statements are the largest consolidated Financial Statements in which the Company has been included.
beneficial ownership of Carrion Enterprises Limited and Umbriel Ventures Limited. On 23 May 2019, Carrion Enterprises
Limited and Umbriel Ventures Limited each sold 3,229,625 ordinary shares to Lixaner Co Limited, a company owned and
controlled by Sigurdur Valtysson, who runs the family office for Agust and Lydur Gudmundsson. On 21 April 2021, Lixaner Co
Limited sold 1,500 shares. Following these transactions, Lixaner Co Limited holds 6,457,750 ordinary shares (representing
1.11% of the issued share capital of the company) and Carrion Enterprises Limited and Umbriel Ventures Limited each hold
142,103,505 ordinary shares (representing 24.52% of the issued share capital of the Company).
Given the close relationship between the parties, Sigurdur Valtysson is to be considered as acting in concert with Agust and Lydur
Gudmundsson for the purposes of the definition in the Takeover Code and the parties are controlling shareholders of the Company.
The aggregate shareholding in the Company of Carrion Enterprises Limited and Umbriel Ventures Limited and their concert party
group (Lixaner Co Limited) is 290,664,760 ordinary shares (representing 50.16% of the issued share capital of the Company).
36. ALTERNATIVE PERFORMANCE MEASURES
The Group uses various non-IFRS financial measures to evaluate growth trends, assess operational performance and monitor
cash performance. The Directors consider that these measures enable investors to understand the ongoing operations of the
business. They are used by management to monitor financial performance as it is considered to aid comparability of the
financial performance of the Group from year to year.
Like-for-like revenue
The Group defines like-for-like revenue as revenue from continuing operations adjusted for the revenue generated from
businesses closed or sold in the current and prior year, revenue generated from businesses acquired in the current and prior
period and the effect of foreign currency movements. The Directors believe like-for-like revenue is a key metric of the Group’s
revenue growth trend, as it allows for a more meaningful comparison of trends from period to period.
200
Bakkavor Group plc
Annual Report & Accounts 2021
The following table provides the information used to calculate like-for-like revenue for the Group.
£ million 2021 2020 Change %
Statutory revenue 1,871.6 1,793.5 4.4%
Revenue from closed and sold businesses – (18.4)
Effect of currency movements 14.0 –
Like-for-like revenue 1,885.6 1,775.1 6.2%
The following tables provide the information used to calculate like-for-like revenue for each segment.
UK
£ million 2021 2020 Change %
Statutory revenue 1,592.4 1,566.6 1.6%
Revenue from closed and sold businesses – (18.4)
Like-for-like revenue 1,592.4 1,548.2 2.9%
US
£ million 2021 2020 Change %
Statutory revenue 180.1 146.5 22.9%
Effect of currency movements 12.9 –
Like-for-like revenue 193.0 146.5 31.8%
China
£ million 2021 2020 Change %
Statutory revenue 99.1 80.4 23.2%
Effect of currency movements 1.1 –
Like-for-like revenue 100.2 80.4 24.6%
Adjusted EBITDA and adjusted operating profit
The Group manages the performance of its businesses through the use of ‘Adjusted EBITDA’ and ‘Adjusted operating profit’,
as these measures exclude the impact of items that hinder comparison of profitability year-on-year. In calculating Adjusted
operating profit, we exclude restructuring costs, asset impairments, and those additional charges or credits that are considered
significant or one-off in nature. In addition, for Adjusted EBITDA we exclude depreciation, amortisation, the share of results of
associates after tax and share scheme charges, as these are non-cash amounts. Adjusted operating profit margin is used as an
additional profit measure that assesses profitability relative to the revenues generated by the relevant segment; it is calculated
by dividing the Adjusted operating profit by the statutory revenue for the relevant segment. The Group calculates Adjusted
EBITDA on a pre-IFRS 16 basis for the purposes of determining covenants under its financing agreements.
The following table provides a reconciliation from the Group’s operating profit to Adjusted operating profit and Adjusted EBITDA.
£ million Note 2021 2020
Operating profit 102.0 62.0
Exceptional items 7 – 21.6
Adjusted operating profit 102.0 83.6
Depreciation 65.2 66.1
Amortisation 0.5 0.5
Share scheme charges 2.3 1.2
(Profit)/loss on disposal of property, plant and equipment (2.9) 0.9
Share of results of associates after tax (0.3) (0.1)
Adjusted EBITDA post IFRS 16 166.8 152.2
Less IFRS 16 impact (12.6) (13.0)
Adjusted EBITDA pre IFRS 16
1
154.2 139.2
Covenant adjustments 1.4 6.6
Adjusted EBITDA (pre IFRS 16 and including covenant adjustments) 155.6 145.8
1 Excludes the impact of IFRS 16 as the Group’s bank facility agreement definition of Adjusted EBITDA excludes the impact of this standard.
Adjusted EBITDA and Adjusting operating profit by segment is reconciled to operating profit in Note 4.
FINANCIAL STATEMENTS
201
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Annual Report & Accounts 2021
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
Operational net debt and leverage
Operational net debt excludes the impact of non-cash items on the Group’s net debt. The Directors use this measure as it
reflects actual net borrowings at the relevant reporting date and is most comparable with the Group’s free cash flow and aligns
with the definition of net debt in the Group’s bank facility agreements which exclude the impact of IFRS 16. The following table
sets out the reconciliation from the Group’s net debt to the Group’s operational net debt.
£ million Note
25 December
2021
26 December
2020
Group net debt 21 (374.1) (411.8)
Unamortised fees (3.4) (4.3)
Interest accrual 0.2 2.3
Lease liabilities recognised under IFRS 16 83.6 80.4
Group operational net debt (293.7) (333.4)
Adjusted EBITDA (pre IFRS 16 and including covenant adjustments) 155.6 145.8
Leverage (Operational net debt/Adjusted EBITDA pre IFRS 16 and including covenant adjustments) 1.9 2.3
Free cash flow
The Group defines free cash flow as the amount of cash generated by the Group after meeting all of its obligations for interest,
tax and pensions, and after purchases of property, plant and equipment (excluding development projects), but before payments
of refinancing fees and other exceptional or significant non-recurring cash flows. Free cash flow has benefitted from non-
recourse factoring of receivables as set out in Note 19 and the extension of payment terms for certain suppliers as described in
Note 25. The Directors view free cash flow as a key liquidity measure, and the purpose of presenting free cash flow is to indicate
the underlying cash available to pay dividends, repay debt or make further investments in the Group. The following table
provides a reconciliation from net cash generated from operating activities to free cash flow.
£ million 2021 2020
Net cash generated from operating activities 144.0 88.5
Dividends received from associates 0.7 0.1
Purchases of property, plant and equipment (59.8) (56.4)
Proceeds on disposal of property, plant and equipment 4.2 0.1
Cash impact of exceptional items 1.2 3.6
Refinancing fees 0.9 4.2
Free cash flow 91.2 40.1
Adjusted earnings per share
The Group calculates Adjusted basic earnings per Ordinary share by dividing Adjusted earnings by the weighted average number
of Ordinary shares in issue during the year. Adjusted earnings is calculated as profit for the period adjusted to exclude
exceptional items as presented in the consolidated income statement and the change in value of derivative financial
instruments. The Directors use this measure as it tracks the underlying profitability of the Group and enables comparison with
the Group’s peer companies. The following table reconciles profit for the period to Adjusted earnings.
For Adjusted diluted earnings per share, the weighted average number of Ordinary shares in issue is adjusted to assume
conversion of all potentially dilutive Ordinary shares.
£ million 2021 2020
Profit for the period 56.8 34.1
Exceptional items (Note 7) – 21.6
Accelerated finance costs – 1.7
Change in fair value of derivative financial instruments 4.0 (3.4)
Tax on the above items (0.8) (3.8)
Adjusted earnings used for the adjusted earnings per share calculation 60.0 50.2
Add back: Tax on adjusted profit before tax 25.4 13.9
Adjusted profit before tax 85.4 6 4.1
Effective tax rate on underlying activities
(Tax on Adjusted profit before tax/Adjusted profit before tax) 29.7% 21.7%
36. ALTERNATIVE PERFORMANCE MEASURES CONTINUED
202
Bakkavor Group plc
Annual Report & Accounts 2021
Number of shares
‘000 2021 2020
Weighted average number of Ordinary shares 579,426 579,426
Effect of dilutive Ordinary shares 9,775 4,193
Weighted average number of diluted Ordinary shares 589,201 583,619
2021 2020
Adjusted basic earnings per share 10.4p 8.7p
Adjusted diluted earnings per share 10.2p 8.6p
Return on Invested Capital (“ROIC”)
The Group defines ROIC as Adjusted operating profit after tax divided by the average invested capital for the year. Adjusted
operating profit after tax is defined as operating profit from excluding the impact of exceptional items, impairment of assets and
profit on disposal of subsidiaries less tax at the Group’s effective tax rate. Invested capital is defined as total assets less total
liabilities excluding net debt at the period end, pension assets and liabilities (net of deferred tax) and fair values for derivatives
not designated in a hedging relationship. The Group utilises ROIC to measure how effectively it uses invested capital. Average
invested capital is the simple average of invested capital at the beginning of the period and the end of the period.
The Directors believe that ROIC is a useful indicator of the amount returned as a percentage of shareholders’ invested capital.
The Directors believe that ROIC can help analysts, investors and stakeholders to evaluate the Group’s profitability and the
efficiency with which its invested capital is employed.
The following table sets out the calculations of adjusted operating profit after tax and invested capital used in the calculation
of ROIC.
£ million Note 2021 2020
Operating profit 102.0 62.0
Exceptional items 7 – 21.6
Adjusted operating profit 102.0 83.6
Taxation at the underlying effective rate (30.3) (18.1)
Adjusted operating profit after tax 71.7 65.5
Invested capital
Total assets 1,503.5 1,449.2
Total liabilities (862.8) (851.1)
Net debt at period end 374.1 411.8
Derivatives not designated as hedges 0.9 0.3
Retirement benefit scheme surplus (37.2) (11.2)
Deferred tax liability on retirement benefit scheme 9.3 2.1
Invested capital 987.8 1,001.1
Average invested capital for ROIC calculation 994.4 997.3
ROIC (%) 7.2% 6.6%
FINANCIAL STATEMENTS
203
Bakkavor Group plc
Annual Report & Accounts 2021
COMPANY STATEMENT OF FINANCIAL POSITION
AS AT 25 DECEMBER 2021
COMPANY STATEMENT OF CHANGES IN EQUITY
52 WEEKS ENDED 25 DECEMBER 2021
£ million Notes
25 December
2021
26 December
2020
Non-current assets
Shares in Group undertakings 4 309.5 309.5
Current assets
Loans to Group undertakings 6 97.2 48.9
Deferred tax assets 0.2 0.2
97.4 49.1
Total assets 406.9 358.6
Current liabilities
Loans from Group undertakings 6 (0.2) –
Total liabilities (0.2) –
Net assets 406.7 358.6
Equity
Called up share capital 7 11.6 11.6
Merger reserve 7 23.8 23.8
Retained earnings 371.3 323.2
Total equity 406.7 358.6
In accordance with the exemptions allowed by Section 408 of Companies Act 2006, the Company has not presented its own
income statement or statement of comprehensive income. The profit for the period was £85.0 million (2020: £nil).
The Financial Statements of Bakkavor Group plc, Company number 10986940, and the accompanying Notes, which form an
integral part of the Company Financial Statements, were approved by the Board of Directors on 7 March 2022. They were signed
on behalf of the Board of Directors by:
Agust Gudmundsson Ben Waldron
Chief Executive Officer Chief Financial Officer
£ million Note
Called up
share capital
Merger
reserve
Retained
earnings
Total
equity
Balance at 29 December 2019 11.6 23.8 322.1 357.5
Credit for share-based payments – – 1.2 1.2
Deferred tax – – (0.1) (0.1)
Profit for the period – – – –
At 26 December 2020 11.6 23.8 323.2 358.6
Dividends 7 – – (38.5) (38.5)
Credit for share-based payments – – 2.3 2.3
Cash-settlement of share-based awards – – (0.6) (0.6)
Deferred tax – – (0.1) (0.1)
Profit for the period – – 85.0 85.0
At 25 December 2021 11.6 23.8 371.3 406.7
204
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Annual Report & Accounts 2021
1. GENERAL INFORMATION
Bakkavor Group plc is a public company, limited by shares, incorporated and domiciled in England, United Kingdom (Company
number: 10986940, registered office: Fitzroy Place, 5th Floor, 8 Mortimer Street, London, England, W1T 3JJ). The Company’s
Ordinary shares are traded on the London Stock Exchange.
The principal activities of the Company and its subsidiaries are described within Note 1 of the Consolidated Financial Statements.
2. SIGNIFICANT ACCOUNTING POLICIES
The Company Financial Statements have been prepared in accordance with the Financial Reporting Standard 101 Reduced
Disclosure Framework (“FRS 101”) and the Companies Act 2006 as applicable to companies using FRS 101 and under the
historical cost convention.
The Company Financial Statements are prepared on the going concern basis as set out in Note 2 to the Consolidated Financial
Statements.
The Company has taken advantage of the following disclosure exemptions under FRS 101:
• The requirement of IFRS 7 Financial Instruments: Disclosures;
• The requirements of paragraphs 91-99 of IFRS 13 Fair Value Measurement;
• The requirement in paragraph 38 of IAS 1 Presentation of Financial Statements to present comparative information in respect of:
Paragraph 79(a) (iv) of IAS 1 Presentation of Financial Statements; and Paragraph 73(e) of IAS 16 Property, Plant and Equipment;
and Paragraph 118(e) of IAS 38 Intangible Assets;
• The requirements of paragraphs 10(d), 10(f), 16, 38A, 38B, 38C, 38D, 40A-D, 111 and 134-136 of IAS 1 Presentation of
Financial Statements;
• The requirement of IAS 7 Statement of Cash Flows;
• The requirements of paragraphs 30 and 31 of IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors;
• The requirements of paragraphs 17 and 18A of IAS 24 Related Party Disclosures;
• The requirements in IAS 24 Related Party Disclosures to disclose related party transactions entered into between two or more
members of a group;
• The requirements of paragraphs 130(f)(ii), 130(f)(iii), 134(d) – 134(f) and 135(c) – 135(e) of IAS 36 Impairment of Assets; and
• The requirements of paragraphs 45(b) and 46 to 52 of IFRS 2 Share-based Payment.
The preparation of Financial Statements in conformity with FRS 101 did not require the use of any critical accounting estimates
or any significant areas of judgement.
The principal accounting policies adopted have been applied consistently and 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.
Amounts due from other Group companies are initially recognised at fair value and subsequently carried at amortised cost net
of allowance for expected credit losses. An allowance is made when there is objective evidence that the Company will be unable
to recover balances in full. Balances are written off when the probability of recovery is assessed as being remote. The
Company’s amounts due from other Group companies at 25 December 2021 amounted to £97.2 million (2020: £48.9 million).
None of these balances include an allowance for expected credit losses and all amounts are expected to be recoverable in full.
3. EMPLOYEES’, DIRECTORS’ AND AUDITORS’ REMUNERATION
Fees payable of £0.1 million (2020: £0.1 million) to the Company’s Auditors in respect of the audit of the Company’s Financial
Statements for the periods ended 25 December 2021 and 26 December 2020 have been borne by fellow Group company
Bakkavor Foods Limited.
The Company has no employees and payments to Directors for the periods ended 25 December 2021 and 26 December 2020
have been borne by fellow Group company Bakkavor Foods Limited. Details of Directors’ remuneration is disclosed within Note
33 of Consolidated Financial Statements.
4. SHARES IN GROUP UNDERTAKINGS
£ million
Investment in
Group companies
Balance at 26 December 2020 and 25 December 2021 309.5
NOTES TO THE COMPANY FINANCIAL STATEMENTS
52 WEEKS ENDED 25 DECEMBER 2021
FINANCIAL STATEMENTS
205
Bakkavor Group plc
Annual Report & Accounts 2021
NOTES TO THE COMPANY FINANCIAL STATEMENTS
52 WEEKS ENDED 25 DECEMBER 2021
5. SUBSIDIARIES
As at 25 December 2021, Bakkavor Group plc held investments in the share capital of the following companies:
Name
Place of
registration and
operation Principal activity
% of voting
shares as at
25 December
2021
% of voting
shares as at
26 December
2020
Directly held investments:
Bakkavor Holdings Limited
1
UK Holding company 100% 100%
Indirectly held investments:
Bakkavor Finance (2) Limited
1
UK Holding company 100% 100%
Bakkavor (London) Limited
1
UK Holding company 100% 100%
Bakkavor Finance Limited
2
UK Customer invoicing and financing of receivables 100% 100%
Bakkavor Limited
1
UK Holding company 100% 100%
Bakkavor USA Inc
4
USA Holding company 100% 100%
Bakkavor USA Limited
1
UK Holding company 100% 100%
Bakkavor Foods USA Inc
4
USA Manufacture of custom and private label savoury
and bakery products
100% 100%
Bakkavor China Limited
1
UK Holding company 100% 100%
Bakkavor Hong Kong Limited
5
Hong Kong Preparation and marketing of fresh prepared foods 100% 100%
Bakkavor China Holdings Limited
5
Hong Kong Holding company 100% 100%
Wuhan Bakkavor Food Company Limited
6
China Production and manufacture of salad products 100% 100%
Wuhan Bakkavor Agricultural Product Processing
Company Limited
20
China Production and manufacture of salad products 100% 100%
Jiangsu Bakkavor Food Company Limited
7
China Production and manufacture of salad products 100% 100%
Shaanxi Bakkavor Food Company Limited
8
China Production and manufacture of salad products 100% 100%
Beijing Bakkavor Food Company Limited
9
China Production and manufacture of salad products 100% 100%
Guangzhou Bakkavor Food Company Limited
10
China Production and manufacture of salad products 100% 100%
Bakkavor (Shanghai) Management Company
Limited
11
China Holding company 100% 100%
Shaanxi Bakkavor Agriculture Processing
Company Limited
12
China Production and manufacture of salad products 100% 100%
Fujian Bakkavor Food Company Limited
13
China Production and manufacture of salad products 100% 100%
Bakkavor (Taicang) Baking Company Limited
14
China Production and manufacture of bakery products 100% 100%
Chengdu Bakkavor Foods Company Limited
15
China Production and manufacture of salad products 100% 100%
Bakkavor Foods Limited
1
UK Preparation and marketing of fresh prepared foods 100% 100%
Bakkavor Estates Limited
2
UK Property management 100% 100%
Bakkavor Pension Trustees Limited
1*
UK Pension trustee holding company 100% 100%
Bakkavor European Marketing BV
16
Netherlands Holding company 100% 100%
NV Bakkavor Belgium BV
17
Belgium Non-trading 100% 100%
BV Restaurant Group Limited
1
UK Production and distribution of fresh prepared foods 100% 100%
Bakkavor Iberica S.L.U.
18
Spain Distribution 100% 100%
Bakkavor Central Finance Limited
2
UK Customer invoicing and financing of receivables 100% 100%
Dormant companies
Bakkavor Dormant Holdings Limited
1*
UK Holding company 100% 100%
Bakkavor Finance (1) Limited
1*
UK Dormant non-trading company 100% 100%
Bakkavor Finance (3) Limited
1*
UK Dormant non-trading company 100% 100%
Bakkavor Acquisitions (2008) Limited
1*
UK Dormant non-trading company 100% 100%
Bakkavor Invest Limited
1*
UK Dormant non-trading company 100% 100%
Bakkavor (Acquisitions) Limited
1*
UK Dormant non-trading company 100% 100%
Bakkavor Asia Limited
1*
UK Dormant non-trading company 100% 100%
Bakkavor Overseas Holdings Limited
1*
UK Dormant non-trading company 100% 100%
BV Foodservice Limited
1*
UK Dormant non-trading company 100% 100%
Bakkavor Desserts Leicester Limited
1
UK Production and manufacture of dessert products 100% 100%
Bakkavor Fresh Cook Limited
1*
UK Dormant non-trading company 100% 100%
English Village Salads Limited
1*
UK Dormant non-trading company 100% 100%
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Bakkavor Group plc
Annual Report & Accounts 2021
Name
Place of
registration and
operation Principal activity
% of voting
shares as at
25 December
2021
% of voting
shares as at
26 December
2020
Notsallow 256 Limited
1*
UK Dormant non-trading company 100% 100%
Kent Salads Limited
1*
UK Dormant non-trading company 100% 100%
Laurens Patisseries Limited
1*
UK Dormant non-trading company 100% 100%
Hitchen Foods Limited
1*
UK Dormant non-trading company 100% 100%
Bakkavor Brothers Limited
1*
UK Dormant non-trading company 100% 100%
Cucina Sano Limited
1*
UK Dormant non-trading company 100% 100%
Butterdean Products Limited
1*
UK Dormant non-trading company 100% 100%
Exotic Farm Prepared Limited
1*
UK Dormant non-trading company 100% 100%
Exotic Farm Produce Limited
1*
UK Dormant non-trading company 100% 100%
Associate companies
La Rose Noire Limited
19
Hong Kong Operation of bakery and food and beverage outlets 45% 45%
Patisserie et Chocolat Limited
19
Hong Kong Operation of bakery and food and beverage outlets 45% 45%
1 The registered address of all these companies is Fitzroy Place, 5th Floor, 8 Mortimer Street, London, England, W1T 3JJ.
2 The registered address of these companies is West Marsh Road, Spalding, Lincolnshire, England, PE11 2BB.
3 The registered address of this company is Thorvaldsensstræti 6, 6th floor, 101 Reykjavík, Iceland.
4 The registered address of these companies is 18201 Central Avenue, Carson, California, 90746 USA.
5 The registered address of these companies is Units 1902-1912, 19/F., Eight Commercial Tower, No 8 Sun Yip Street, Chai Wan, Hong Kong.
6 The registered address of this company is Mujiajing ZhangDuHu Farm, Xinzhou District, Wuhan, China.
7 The registered address of this company is Agricultural Development Area, Changle Town, Haimen City, Jiangsu Province, China.
8 The registered address of this company is Qinghua Keji Garden, Middle of Shiji Road, Xianyang City, Shanxi Province, China.
9 The registered address of this company is South Xitai Road, Da Sun Gezhuang Town, Shunyi District, Beijing, China.
10 The registered address of this company is No. 55 Banyutang Road, High Tech Development Area, Guangzhou, China.
11 The registered address of this company is Room 01, 3A Floor, Number 16 Lane 1977, Jinshajiang Road, Putuo District, Shanghai, China.
12 The registered address of this company is No.424, Building 4, Chongwen tower scenic area (phase I), Jinghe new town, Xixian new district, Shaanxi province
13 The registered address of this company is Jiulong Industry Park of Hua An Economic Development Zone, China.
14 The registered address of this company is Taicang City, No 29 Qingdao East Road, China.
15 The registered address of this company is Rong Tai Road, Cross-Straits Science & Technology Industry Development Park, Wenjiang District, Chengdu, China.
16 The registered address of this company is Prins Bernhardplein 200, 1097 JB Amsterdam, The Netherlands.
17 The registered address of this company is Lammerdries-Zuid 16F, 2250 Olen, Belgium.
18 The registered address of this company is Calle Cartagena 57, 1º D Torre Pacheco, Murcia CP 30700, Spain.
19 The registered address of these companies is 2/F Corporation Square 8 Lam Lok Street, Kowloon Bay, Kowloon, Hong Kong. La Rose Noire and Patisserie et Chocolat Limited are
associate companies of the Bakkavor Group, owned by Bakkavor China Limited.
20 The registered address of this company is Room 706, 7th floor, No. 1 Entrepreneurship service centre, Hanshi No. 1 road, Honggang village, Wuhan yangluo economic development zone
* These companies are UK dormant companies who file dormant accounts which are exempt from audit by virtue of s479A of Companies Act 2006
6. FINANCIAL INSTRUMENTS
Foreign currency risk
The Company is not exposed to any significant foreign currency risk as principally all its balances are in Pounds Sterling.
Interest rate risk management
The Company has intercompany loan receivables. There are no interest-bearing balances and therefore the Company is not
exposed to any interest rate risk.
Categories of financial instruments
£ million
25 December
2021
26 December
2020
Financial assets and liabilities
Measured at amortised cost:
Loans to Group undertakings 97.2 48.9
Loans from Group undertakings (0.2) –
FINANCIAL STATEMENTS
207
Bakkavor Group plc
Annual Report & Accounts 2021
NOTES TO THE COMPANY FINANCIAL STATEMENTS
CONTINUED
7. CALLED UP SHARE CAPITAL AND RESERVES
Called up share capital
£ million
25 December
2021
26 December
2020
Issued and fully paid:
579,425,585 (2020: 579,425,585) Ordinary shares of £0.02 each 11.6 11.6
All Ordinary shares of £0.02 each are non-redeemable, and carry equal voting rights and rank for dividends and capital
distributions, whether on a winding up or otherwise.
As a result of the COVID-19 pandemic and its impact on the business during 2020 the Board did not declare any dividends for the
financial year ended 26 December 2020.
At the AGM on 20 May 2021, a deferred final dividend of 4 pence per Ordinary share for the financial year ended 28 December
2019 was re-instated and declared. The total amount of £23,177,023 was paid to Ordinary shareholders on 25 May 2021.
An interim dividend of 2.64 pence per Ordinary share was declared in September 2021. The total amount of £15,296,835 was paid to
Ordinary shareholders on 15 October 2021. This has resulted in total dividend payments of £38,473,858 (2020: £nil) during the year.
A final dividend of 3.96 pence per share has been proposed for approval at the Annual General Meeting on 25 May 2022 and will
be payable on 30 May 2022 to Ordinary shareholders on the register at 29 April 2022.
Merger reserve
The merger reserve was created as a result of the acquisition of Bakkavor Holdings Limited and represents the difference
between the carrying values of the net assets of Bakkavor Holdings Limited and the value of the share capital and share
premium arising on the share for share exchange that resulted in Bakkavor Group plc acquiring Bakkavor Holdings Limited.
8. RELATED PARTY TRANSACTIONS
During the period, the Company entered into the following transactions with related parties:
£ million
25 December
2021
26 December
2020
Loans to Group undertakings 97.2 48.9
Loans from Group undertakings (0.2) –
Loans to Group undertakings relate to corporate loans of £85.0 million (2020: £nil) due from Bakkavor Holdings Limited, £12.2
million (2020: £48.4 million) due from Bakkavor Finance (2) Limited and £nil (2020: £0.5 million) due from Bakkavor Foods Limited.
These amounts are unsecured and will be settled in cash. No guarantees have been given or received. No provisions have been
made for expected credit losses in respect of the amounts owed by related parties.
Amounts are denominated in Sterling. All related party receivables are held at amortised cost.
Loans to Group undertakings do not carry interest on the outstanding corporate loan balances.
Loans from Group undertakings relate to a corporate loan of £0.2 million (2020: £nil) due from Bakkavor Foods Limited.
Loans from Group undertakings do not carry interest on the outstanding corporate loan balances.
9. EVENTS AFTER THE STATEMENT OF FINANCIAL POSITION DATE
There have been no significant events after the statement of financial position date to report.
10. CONTROLLING PARTY
Two of the Company’s Directors, Agust Gudmundsson and Lydur Gudmundsson, hold shares in the Company through their
beneficial ownership of Carrion Enterprises Limited and Umbriel Ventures Limited. On 23 May 2019, Carrion Enterprises
Limited and Umbriel Ventures Limited each sold 3,229,625 ordinary shares to Lixaner Co Limited, a company owned and
controlled by Sigurdur Valtysson, who runs the family office for Agust and Lydur Gudmundsson. On 21 April 2021, Lixaner Co
Limited sold 1,500 shares. Following these transactions, Lixaner Co Limited holds 6,457,750 ordinary shares (representing
1.11% of the issued share capital of the company) and Carrion Enterprises Limited and Umbriel Ventures Limited each hold
142,103,505 ordinary shares (representing 24.52% of the issued share capital of the Company).
Given the close relationship between the parties, Sigurdur Valtysson is to be considered as acting in concert with Agust and Lydur
Gudmundsson for the purposes of the definition in the Takeover Code and the parties are controlling shareholders of the Company.
The aggregate shareholding in the Company of Carrion Enterprises Limited and Umbriel Ventures Limited and their concert party
group (Lixaner Co Limited) is 290,664,760 ordinary shares (representing 50.16% of the issued share capital of the Company).
208
Bakkavor Group plc
Annual Report & Accounts 2021
ADVISERS AND REGISTERED OFFICE
General Counsel and Company Secretary
Annabel Tagoe-Bannerman
Registered office
Fitzroy Place, 5th Floor
8 Mortimer Street
London
W1T 3JJ
Company number
10986940
Registrar
Equiniti Limited
Aspect House
Spencer Road
Lancing
BN99 6DA
Bankers
Barclays Bank PLC
Multinational Corporates
One Churchill Place
London
E14 5HP
Independent Auditors
PricewaterhouseCoopers LLP
1 Embankment Place
London
WC2N 6RH
Brokers
Citigroup Global Markets Limited
Citigroup Centre
33 Canada Square
London
E14 5LB
Peel Hunt LLP
100 Liverpool Street
London
EC2M 2AT
Solicitors
Freshfields Bruckhaus Deringer LLP
100 Bishopsgate
London
EC2P 2SR
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Bakkavor Group plc
Fitzroy Place, 5th Floor, 8 Mortimer Street, London, W1T 3JJ
Bakkavor Group plc. Company No: 10986940
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