RENEWED
ENHANCED
Refreshed
Bakkavor Group plc
Annual Report & Accounts 2023
A strong
performance...
STRATEGIC REPORT
Our business at a glance
4
Key performance indicators
6
Chairman’s statement
8
Chief Executive’s overview
10
How we create value
14
Our markets
16
Our strategy
20
Our people
30
Divisional review: UK, US, China
34
ESG: Trusted Partner
38
Non-financial and sustainability information statement
46
ESG: TCFD
50
Stakeholder engagement
64
Financial review
68
Risk management and risks
72
Viability statement
81
GOVERNANCE
Chairman’s governance overview
84
Corporate governance compliance statement
86
Group Board
88
Corporate governance report
92
Nomination Committee report
107
ESG Committee report
111
Audit, risk and internal control
114
Audit and Risk Committee report
116
Directors’ remuneration report
124
Directors’ report
147
Statement of Directors’ responsibilities
in respect of the Financial Statements
153
FINANCIAL STATEMENTS
Independent Auditors’ report
156
Consolidated income statement
166
Consolidated statement of comprehensive income
167
Consolidated statement of financial position
168
Consolidated statement of changes in equity
169
Consolidated statement of cash flows
170
Notes to the Consolidated Financial Statements
171
Company statement of financial position
215
Company statement of changes in equity
215
Notes to the Company Financial Statements
216
COMPANY INFORMATION
Advisers and registered office
220
Contents
Disclaimer – forward-looking statements
This report includes forward-looking statements. By their nature,
forward-looking statements involve risk, uncertainty and other factors,
which may cause the actual results and developments of the Group to
differ materially from any results and developments expressed or implied
by such 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 is
under no obligation to publicly update or review these forward-looking
statements other than as required by law.
FINANCIAL REVIEW
We protected our profitability whilst delivering a
significant debt reduction and leverage improvement.
This leaves us in a strong position to deliver
profitable growth.
CHIEF EXECUTIVE’S OVERVIEW
Last year we laid out our plan to adopt new tactics
alongside our established strategy, and we executed
a decisive three-point plan to protect profitability:
pg 10
1
RENEWED
purpose through our new
organisational structure: delivering
synergies and efficiencies
2
REFRESHED
regional priorities: ensuring
focus and clarity for our local
leadership teams
3
ENHANCED
focus on managing cash:
reducing debt and
improving leverage
See our website here:
bakkavor.com
pg 68
Operational net debt
£229.6m
down £55.3m
Leverage
1.5x
down 0.4x
...and gathering
momentum
for the year ahead
DIRECTORS’ REMUNERATION
REPORT
To continue our focus on
sustainability, we have updated
our bonus targets to include
more of our ESG KPIs.
See our ESG report here:
bakkavor.com/en/esg/our-approach
OUR PEOPLE
Our people plan is driven by
employee feedback, whilst our new
‘Better Behaviours, Better Bakkavor’
training has supported us to continue
embedding our values and build on
new ways of working.
pg 124
ESG: TRUSTED PARTNER
We have made excellent progress
against our ESG priorities,
with all four of our non-financial
KPIs showing improvement.
pg 38
pg 30
£2,203.8m
Group reported revenue
(2022: £2,139.2m)
£97.1m
Operating profit
(2022: £37.8m)
9.4p
Basic EPS
(2022: 2.2p)
£2,214.2m
Group like-for-like revenue
(2022: £2,103.2m)
£94.3m
Adjusted operating profit
(2022: £89.4m)
8.8p
Adjusted EPS
(2022: 9.5p)
Financial
highlights
Total Group net carbon emissions
(tCO
2
e)
104,269
-5.3%
UK food waste
6.6%
-150bps
UK accidents resulting in lost time
>7 days (per 100k employees)
259
-19.3%
UK employee turnover
26.2%
-190bps
READ MORE
pg 6.
Bakkavor Group plc | Annual Report & Accounts 2023 |
1
Strategic
Report
Our business at a glance
4
Key performance indicators
6
Chairman’s statement
8
Chief Executive’s overview
10
How we create value
14
Our markets
16
Our strategy
20
Our people
30
Divisional review: UK, US, China
34
ESG: Trusted Partner
38
Non-financial and sustainability
information statement
46
ESG: TCFD
50
Stakeholder engagement
64
Financial review
68
Risk management and risks
72
Viability statement
81
2
| Bakkavor Group plc | Annual Report & Accounts 2023
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
Bakkavor Group plc | Annual Report & Accounts 2023 |
3
Bakkavor Group plc | Annual Report & Accounts 2023 |
3
OUR BUSINESS AT A GLANCE
Leading manufacturer
of Fresh Prepared Food
OUR CULTURE
To empower and support all our stakeholders by living our values.
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
OUR STRATEGY
To deliver profitable and sustainable growth.
UK
EXCELLENCE
TRUST
INTERNATIONAL
Drive returns by
leveraging our
UK number one
market position
Deliver superior
performance
through
operational
excellence
Be a Trusted
Partner for
our people,
customers,
suppliers and
communities
Accelerate
profitable
growth in the
US and China
OUR PURPOSE
To lead the way through flawless execution and by living our
values. To delight customers and consumers through fresh,
convenient and great-tasting food that we create every day.
4
| Bakkavor Group plc | Annual Report & Accounts 2023
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
OUR BUSINESS OVERVIEW
Our deep understanding of consumers’ changing needs enables us to create
innovative products for our customers around the world.
c.1,500
products across meals,
pizza and bread, salads
and desserts
27 sites
21 factories, 1 head office,
4 distribution centres,
1 growing unit
£1,852.7m
reported revenue
84.1%
of Group reported revenue
£93.9m
adjusted operating profit
£96.7m
operating profit
READ MORE
pg 34.
OUR UK DIVISION
Leading supplier to grocery
retailers with category breadth
and unrivalled scale.
c.270
products across fresh meals,
dips, artisan bread, soups,
sauces and burritos
6 sites
5 factories,
1 head office
£229.4m
reported revenue
10.4%
of Group reported revenue
£3.4m
adjusted operating profit
£0.5m
operating profit
READ MORE
pg 36.
OUR US DIVISION
National provider of fresh meals
to grocery retailers and direct-to-
consumer customers.
c.1,500
products across fresh cut-
salads, food-to-go salads
and sandwiches, bakery,
meals, soups and sauces
11 sites
9 factories, 1 head office,
1 farm
£121.7m
reported revenue
5.5%
of Group reported revenue
£(3.0)m
adjusted operating loss
£(0.1)m
operating loss
READ MORE
pg 37.
OUR CHINA DIVISION
Supplies foodservice and retail
customers nationally with
value-added fresh products.
Bakkavor Group plc | Annual Report & Accounts 2023 |
5
2023
104,269
2022
110,106
2021
135,691
2023
6.6%
2022
8.1%
2021
9.2%
2023
259
2022
321
2021
334
2023
26.2%
2022
28.1%
2021
27.8%
KEY PERFORMANCE INDICATORS
Link to our strategy
Link to our strategy
104,269
-5.3%
6.6%
-150bps
What are we measuring?
This is calculated by dividing the number
of colleagues leaving the business
(excluding fixed-term contracts and
redundancies) against total headcount.
Why is it important?
Our colleagues are our 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 resources
required for recruitment and onboarding.
Non-financial performance
259
-19.3%
26.2%
-190bps
What are we measuring?
The number of accidents across our
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”).
Why is it important?
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 our systems.
What are we measuring?
Scope 1 and 2 net (market-based)
emissions across the Group.
Why is it important?
Climate change is the single biggest
sustainability challenge facing the world.
Bakkavor has a part to play in reversing
the climate emergency and supporting
the shift towards a low-carbon economy.
This is why we have made the commitment
to reach Net Zero emissions across our
Group operations by 2040.
What are we measuring?
UK food waste as per the Food Loss and
Waste (“FLW“) Accounting and Reporting
Standard. Percentage UK 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)’.
Why is it important?
Managing UK food waste is a top priority
across our operations, from both a
sustainability and efficiency perspective.
This forms the basis of our commitment to
halve our UK food waste by 2030, in line with
the UN Sustainable Development Goal.
1
The Group’s bonus scheme and long-term incentive awards are
based on performance across a selection of three KPIs. See pg
130-131 in the Directors’ remuneration report.
2
Alternative Performance Measures (“APMs”), including ‘like-for-
like’, ‘adjusted’ and ‘underlying’, are applied consistently throughout
the 2023 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. The Group’s
financial reporting period is typically 52 weeks, however, every six
years an additional week is included to ensure that its year-end date
remains near the end of December. Throughout the Annual Report
and Accounts 2023, the Group’s FY22 results are based on a 53 week
period. FY22 reported revenue is for the 53 weeks ended
31 December 2022. Like-for-like revenue excludes the 53rd week.
UK:
drive returns by leveraging our UK
number one 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 people,
customers, suppliers and communities
Link to our strategy
Performance year-on-year
Improved
Worsened
READ MORE:
Financial review pg 68 for detail on our
year-on-year financial performance.
Risk management and risks pg 76
for detail on our principal risks and
developments in 2023.
Directors’ remuneration report pg 124
for detail on our Group’s bonus scheme
and long-term incentives.
ESG: Trusted Partner pg 38 for detail on our
year-on-year non-financial KPI performance.
Non-financial and sustainability
information statement pg 46.
Link to our strategy
Maintained
Link to our strategy
UK accidents resulting in lost time
>7 days (per 100k employees)
Total Group net carbon emissions
(tCO
2
e)
UK employee turnover
1
UK food waste
Bakkavor
in numbers
6
| Bakkavor Group plc | Annual Report & Accounts
2023
2023
8.8p
2022
9.5p
2021
10.4p
2023
1.5x
2022
1.9x
2021
1.9x
2023
7.5%
2022
7.1%
2021
7.2%
2023
£2,214.2m
2022
£2,103.2m
2021
£1,900.9m
2023
£94.3m
2022
£89.4m
2021
£102.0m
2023
£103.2m
2022
£53.4m
2021
£80.1m
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
Link to our strategy
8.8p
-0.7p
Link to our strategy
7.5%
+40bps
Link to our strategy
1.5x
-0.4x
What are we measuring?
Revenue growth at a constant currency
excluding acquisitions and closed and
sold businesses. In 2022 this also
excludes the 53rd week of trading.
Why is it important?
The Group uses like-for-like revenue
because it allows for a more meaningful
comparison of revenue trends from
period to period.
What are we measuring?
Adjusted operating profit measures the
underlying profitability of the business,
excluding restructuring costs, asset
impairments and those additional
charges or credits that are considered
significant or one-off in nature.
Why is it important?
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.
What are we measuring?
Free cash flow is the cash generated
by the Group after meeting all of its
obligations for interest, tax and pensions,
after purchases of property, plant and
equipment and after IFRS16 capital lease
payments, but before payments of
refinancing fees and other exceptional
or significant non-recurring cash flows.
Why is it important?
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.
Financial performance
£2,214.2m
+5.3%
£94.3m
+5.5%
£103.2m
+£49.8m
What are we measuring?
Adjusted earnings per share measures the profit
per share of the Group. It is 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
excluding exceptional items and the change in
fair value of derivative financial instruments.
Why is it important?
It tracks the underlying profitability of the Group
and enables the comparison of performance
with the Group’s peer companies.
What are we measuring?
This is calculated as adjusted operating
profit after tax divided by the average
invested capital to determine how
effective the business is in generating
returns from its asset base.
Why is it important?
It is a useful indicator of the amount
returned as a percentage of shareholders’
invested capital, and is used by investors
and other stakeholders to evaluate the
Group’s profitability and the efficiency
with which its invested capital is employed.
What are we measuring?
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 in the Group’s
statutory net debt, and is comparable with
the Group’s free cash flow measure.
Why is it important?
The leverage ratio must be below the
maximum defined in the Group’s bank debt
facilities to ensure the facilities remain
available. It also determines the interest
margin payable on debt drawn.
Link to our strategy
Link to our strategy
Link to our strategy
Like-for-like revenue
2
(£m)
Adjusted earnings per share
1,2
(pence)
Adjusted operating profit
1,2
(£m)
Leverage ratio (net debt/adjusted
EBITDA pre IFRS 16)
2
(times)
Free cash flow
2
(£m)
Return on invested capital
(“ROIC”)
2
Bakkavor Group plc | Annual Report & Accounts 2023 |
7
CHAIRMAN’S STATEMENT
Recognising our coeagues
is fundamental to our success
I have often referred to
Bakkavor’s resilience; this
came through again in 2023
thanks to our colleagues’
can-do approach in the face of
challenging market conditions.
Simon Burke
Chairman
8
| Bakkavor Group plc | Annual Report & Accounts 2023
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
In our core UK business, there was
still a significant amount of inflation
during 2023. Once again, we were
able to work constructively with our
customers to mitigate most of this, but
we were still left with a significant gap
to recover through our own internal
actions. As such, our restructuring
project, which was delivered ahead of
time, was fundamental to the Group’s
improved profits.
In common with most entities in the
food sector, much of our sales gain
came from pricing rather than volume
increases. Even the full recovery of
inflation costs will result in gross
margin erosion, but our recovery plan
enabled us to stabilise the margin this
year. Nevertheless, rebuilding our
margin will continue to be a priority for
us so that we can support investment
in the business. In this respect, the
increase in National Minimum Wage in
April will be a particular challenge for
us, but we will innovate, collaborate
and refine again to meet it.
In the US, we have focused on improving
profitability and strengthening our
business rather than just growing sales.
Many of the issues that impacted
performance in 2022 and in the first half
of 2023 have been addressed, and this
has generated a positive improvement
in performance in the second half of the
year. Our refreshed management team
has tackled the existing issues head on,
implementing new ways of working and,
importantly, engaging proactively with
our customers to strengthen these
relationships. Looking ahead, we
aim to return to revenue growth in
the second half having successfully
reshaped our business.
China saw our strongest volume
performance as the country recovered
from Covid. We are now making much
better use of our capacity in China, but
there is plenty of opportunity to grow
further within the factories we have.
There has been encouraging growth
in our sales in the retail sector which
broadens and diversifies our business
and customer base. The growth
opportunity in China remains very
attractive.
Our performance on cash management
is one of our highlights of the year. We
finished well ahead of expectations at
a debt to EBITDA ratio of just 1.5 times.
This was timely in a period of heightened
interest rates and, in the absence of
a suitably attractive investment
opportunity, we aim to sustain this
position in 2024. In line with our stated
policy, we are proposing a final dividend
of 4.37 pence per share, giving a total
dividend for the year of 7.28 pence, an
increase of 5% on last year.
We saw a significant and welcome
increase in the proportion of permanent
(as opposed to agency) employees in
our factories. We also had a strong and
improved response to our Employee
Engagement Survey. We implemented a
number of actions based on last year’s
survey, and it is encouraging to see the
positive impact these have had on our
colleagues. As always, the survey has
raised other topics to think about and
improve upon, on which we have already
begun working.
Trusted Partner, our ESG strategy,
has made good progress during the
year. We are pleased to see that the
KPIs and management targets for
our key initiatives aimed at UK food
waste reduction and Net Zero are
now fully integrated, alongside the
more traditional financial and
operating measures.
The significant management and Board
changes described in my report last year
have been very positive for Bakkavor.
The Board and its Committees are
working well, with quality debate and
the appropriate levels of challenge.
It was good to see this reflected in our
recent external Board evaluation report.
READ MORE
pg 106.
We knew 2023 was going to be another tough year. However, after delivering a plan to
protect the Group’s profitability and reinforce the key strengths of our business, I am
pleased to report that we have succeeded in navigating the challenges we faced, closing
the year in a strong position in all three of our markets. Our financial performance
exceeded expectations, with adjusted operating profit increasing by 5.5% to £94.3m.
Since year-end, our major shareholder
Baupost Group (“Baupost”) sold its
entire stake in Bakkavor to LongRange
Capital L.P. (“LongRange Capital”). As a
result of this, Patrick Cook, who served
on our Board as the representative of
Baupost, stood down on 16 January.
Patrick has been a greatly valued
member of the Board and we will miss
his input. Bob Berlin was appointed on
the same date as the representative
Director for LongRange Capital. We are
welcoming Bob back to the Board, as he
served as Baupost’s representative
Director from 2016 to 2018, and we look
forward to working with him again.
The current year has started well, and
we believe that the work done in 2023
puts us in a strong position to continue
to move the business forward across
all three markets. Our focus is on
profitable rather than headline growth
and we will pace ourselves accordingly.
Easing inflation should give us the
opportunity to repair margins, and we
will go on seeking greater efficiency in
our operations so that we can continue
to serve our customers reliably and
competitively.
I have often referred to the resilience
of Bakkavor in the face of challenging
conditions, and it came through again in
2023. It is born of the can-do approach
of our colleagues everywhere, and their
determination to do a good job whatever
the market conditions may be. I want to
thank them, one and all, for this and for
the tremendous impact it has had on
our performance.
Simon Burke
Chairman
4 March 2024
Bakkavor Group plc | Annual Report & Accounts 2023 |
9
CHIEF EXECUTIVE’S OVERVIEW
Driving momentum
across the business
2023 required us to develop a
decisive and dynamic plan to
successfully manage another
year of external challenges.
We executed this plan at pace
and as a result we delivered
improved profitability and
reduced leverage for the full year.
Mike Edwards
Chief Executive Officer
10
| Bakkavor Group plc | Annual Report & Accounts 2023
1
2
3
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
£55m
reduction to operational
net debt
1.5x
leverage
We are building a strong platform from
which to deliver profitable growth in the
future. I am incredibly proud of what
the Group has achieved this year
against such a challenging backdrop
and, as ever, the great people we have
in the business are fundamental to
our success. I would like to thank our
teams for their relentless hard work
and commitment.
Our strategy remains unchanged: we
will continue to leverage our leading
position in the UK and deliver profitable
international growth.
In my first year as CEO I am pleased with the Group’s performance and,
more importantly, we have established positive momentum in all three regions.
These pillars are underpinned
and driven by our commitment to
operational excellence and desire
to be a Trusted Partner for our
colleagues and other stakeholders.
Last year we said we needed to adopt
new tactics alongside this established
strategy, and we executed a decisive
three-point plan to protect profitability.
RENEWED
purpose
through our new organisational
structure: delivering synergies and efficiencies
REFRESHED
regional priorities:
ensuring focus and
clarity for our local leadership teams
ENHANCED
focus on managing cash:
reducing debt
and improving leverage
Having fully executed this plan, we are seeing the benefits
in our financial performance and our broader KPIs.
Bakkavor Group plc | Annual Report & Accounts 2023 |
11
CHIEF EXECUTIVE’S OVERVIEW
CONTINUED
1
RENEWED
purpose
through our new
organisational structure
Our new leadership and operational
structure was embedded quickly and
has created renewed energy, focus and
purpose across the Group. The pace at
which our teams have embraced these
changes delivered £17m of cost savings
in the year, ahead of initial expectations
of £15m. On top of this, the operational
alignment around our Meals and Bakery
sectors in the UK is also fuelling further
synergies and efficiencies.
The Group continued to demonstrate
its resilience as inflationary and supply
chain pressures persisted. Strong levels
of service, coupled with our innovation
pipeline, helped us to grow our market
share in the UK. The new structure has
enabled better sharing of ideas and
expertise across the Group, more
dynamic balancing of volume between
UK sites, and a more consistent
approach to leveraging data from our
new manufacturing system. All of this
has led to improvements in factory
performance, which were vital in
helping to close the profitability shortfall
caused by unrecovered inflation.
READ MORE
pg 20.
2
REFRESHED
regional priorities
UK: winning market share
and mitigating inflation
In the UK, we delivered ahead of
expectations on our aggressive plan
to mitigate softer market volumes
and persistent cost inflation. Our
focus on winning share by ensuring
strong availability of our products,
despite significant supply chain
disruption, targeted innovation and
net business gains, saw us continue
to outperform the market.
We have continued to work
collaboratively with our customers
on price recovery, complemented
by our internal levers to protect
profitability, including two factory
closures which were completed
ahead of plan in the year.
US: business stabilised and
returned to profitability
In the US, we are realising the benefits
of our plan to prioritise profitability
ahead of revenue growth in the
short-term. It was necessary to embed
a new leadership team, who have
driven significant progress in factory
efficiency, whilst also right-sizing
our cost base and focusing on higher
margin products. We have also focused
on strengthening relationships with
our customers, working more closely
with and delivering more for them.
These actions stabilised the business
and returned the US to profitability in
the second half, providing a strong
platform for measured and profitable
growth in the future.
China: improved profitability
as volumes recover
In China, we have delivered against
our priority to leverage our footprint
as volumes rebuilt post-Covid, with
32% volume growth having been
seamlessly onboarded. We have also
continued to diversify our business
through building our presence in the
retail channel, which grew year-on-
year and now accounts for 20% of
revenue, up from less than 2% in 2018.
This has led to reduced losses and,
importantly, the business is now
cash-generative and self-sustaining,
which will remain an imperative
going forward.
READ MORE
pg 36.
3
ENHANCED
focus on managing cash
We have reduced capital expenditure,
with more targeted spend prioritising
productivity initiatives whilst certain
investments in the US were paused as
we focused on profitability. We also
delivered a considerable improvement
in working capital by reducing inventory,
which had been at elevated levels
since 2019 due to Brexit uncertainty,
Covid-related availability challenges
and general supply chain volatility.
This enhanced focus drove a significant
increase in free cash generation which
enabled a £55.3m reduction in net debt
to £229.6m (FY22: £284.9m), giving a
0.4x reduction in leverage to 1.5x (FY22:
1.9x), With leverage now at the lower
end of our range, we have reset our
target to 1.0 to 2.0x.
READ MORE
pg 68.
12
| Bakkavor Group plc | Annual Report & Accounts 2023
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
Becoming a better Bakkavor
We recognise that our people are the
best in the industry and, despite the
cost pressures faced by the business,
we are continuing to listen to feedback
from our teams and invest accordingly.
This year, 88% of our colleagues took
part in our Employee Engagement
Survey (“EES”), giving us the insights
to make Bakkavor an even better
place to work.
We continue to embed our values across
the business, and our priority for 2023
was to use these values as an important
enabler for delivering our strategy and
collaborating effectively. To support
this, we launched a UK-wide values
recognition programme alongside
new training to ensure an increased
focus on our ‘respect and trust’ value.
There are three things I am particularly
proud of. Firstly, our ‘Better Behaviours,
Better Bakkavor’ workshop to support
managers in identifying and challenging
behaviours which do not align with our
values. Secondly, our staff shop where
we have ensured every site has access
to a range of Bakkavor products that
we sell at a heavily discounted price.
Thirdly, we are proud to sponsor the
Coronation Food Project, which is
helping to reduce food poverty.
The progress we see across our
financial KPIs has been matched
by further improvement across
our strategic ESG measures. Our
sustainability KPIs are now well-
embedded and we are seeing
significant progress across all of our
strategic ESG measures, particularly
food waste and carbon emissions.
With regard to the latter, we have
re-emphasised our commitment to
reaching Net Zero in our Group
operations by 2040 by submitting Net
Zero aligned targets for all scopes to
the Science Based Targets initiative
(“SBTi”). We have also made some
improvement in employee turnover,
albeit it remains higher than we would
ideally like. We will therefore continue
to focus on employee engagement.
Looking ahead to 2024, we have
reinforced our commitments across
our Trusted Partner strategy by
embedding both food waste and
net carbon emissions within our
management bonus targets.
Outlook: building foundations
for further profitable growth
The consumer environment is
improving but still remains
challenging, as such, we are planning
for subdued volumes leading to
revenue growth of 1% to 2% in 2024.
We are not, however, reliant on
volumes to deliver an improvement
this year and trading in 2024 has
started well. We are confident that
the actions we have taken and the
clear focus we have put in place
through 2023 will continue to support
positive momentum across the
business. As a result, we now expect
to deliver 2024 adjusted operating
profit at least in line with the upper
end of market expectations
1
.
In the UK, whilst we are planning
for subdued growth in 2024, we
have a strong pipeline of new
business opportunities and are
seeing encouraging signs in the
market. Volumes have started
growing again since Q4 2023, on the
back of reducing inflation, a general
pick-up in consumer confidence
which has led to an increase in
shopping frequency.
After two years of unprecedented
inflation in the UK, we would expect
margins to improve given our continued
focus on cost and efficiency.
In the US, we expect the actions we have
taken to embed operational performance
to significantly improve profitability, and
we would expect to return to revenue
growth in the latter part of 2024.
Looking further ahead, consumer
demand for our fresh prepared
products in the US remains strong
and we continue to be very positive
and confident about the opportunity
for long-term profitable growth in
this attractive market.
In China, we expect to maintain
current levels of profitability, with
a focus on operational efficiency
supporting ongoing growth in an
increasingly competitive environment.
China continuing to be cash-generative
will remain a clear imperative for the
business going forward. Our factories
are well invested with limited need for
capital as the business grows.
From a Group perspective, having
achieved the lower end of our leverage
range, we have reset our target to 1.0 to
2.0x. We expect a further reduction in
debt through a combination of working
capital improvements and enhanced
profitability. This reduction in debt will
be materially lower than in 2023 as
capital investment will return to the
more normal level of c.£70m in 2024.
This includes £10m of cash costs
for the detailed design phase, which
is the first stage of replacing our UK
ERP systems.
We also continue to target a
progressive dividend policy, reflecting
our confident outlook.
Our offer continues to resonate
with customers and consumers and
we will continue to strengthen our
balance sheet, whilst investing in our
future. We have a strong platform for
sustainable, profitable growth and
we will remain focused on delivering
value for all our stakeholders.
READ MORE
pg 124.
Mike Edwards
Chief Executive Officer
4 March 2024
1
Based on company compiled consensus (“Consensus”) which includes all covering analysts. Adjusted operating profit Consensus for FY 24 at £97.1m with a range of £95.0m to £99.9m.
Bakkavor Group plc | Annual Report & Accounts 2023 |
13
HOW WE CREATE VALUE
Creating value
for all our stakeholders
c.18,000
COLLEAGUES
Our
key
resources
COLLEAGUES
CUSTOMERS
SUPPLIERS
INVESTORS
COMMUNITIES
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
OUR KEY STAKEHOLDERS
Our
busine model
STRONG
CUSTOMER
RELATIONSHIPS
RESILIENT
SUPPLY CHAIN
GREAT
PEOPLE
LEADING
OPERATIONAL
DELIVERY
CONSUMER
INSIGHT
TARGETED
INNOVATION
BREADTH
OF OFFER
c.1,300
SUPPLIERS WE
SOURCE FROM
44
SITES ACROSS THE
UK, US AND CHINA
>3,000
PRODUCTS ACROSS
THE GROUP
OUR VALUES
READ MORE
pg 64.
READ MORE
pg 93.
READ MORE
pg 34.
£44m
CAPITAL INVESTED
IN 2023
14
| Bakkavor Group plc | Annual Report & Accounts 2023
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
88%
EES RESPONSE
RATE
Skilled, engaged and progressive
talent pool, embedding our values
Our
value creation
READ MORE
pg 30.
>1,500
NEW PRODUCTS
CREATED IN 2023
High-quality and great-tasting
Fresh Prepared Food that meets
consumers’ changing needs
READ MORE
pg 16.
100%
OF UK SITES HAVE
ADOPTED OUR NEW
MANUFACTURING
SYSTEM
Well-invested, strategically located
footprint to capitalise on future growth
READ MORE
pg 20.
£55m
REDUCTION
IN NET DEBT
Disciplined capital allocation, with
robust cash flow generation and
balance sheet strength, provides
strong foundations
READ MORE
pg 68.
150 bps
REDUCTION
IN UK FOOD WASTE
Clear commitments and delivering
progress under ESG focus areas
READ MORE
pg 38.
A RENEWED, REFRESHED AND ENHANCED APPROACH
TO DELIVERING VALUE FOR ALL OUR STAKEHOLDERS
Bakkavor Group plc | Annual Report & Accounts 2023 |
15
OUR MARKETS
Our
market
summary
WHAT’S HAPPENING:
Consumers in the UK, and to a lesser extent in the
US, have dealt with persistent inflation by being
more attentive to the value of the products they
purchase. For example, 61% of UK consumers are
choosing cheaper products to help manage grocery
spend
1
. This has also been true in China, where an
underwhelming economic recovery has affected
consumer confidence, leading to a decline in
discretionary and large purchases. In the UK, we
saw increased demand for retailers’ value tier and
affordable meal solutions, such as pizzas. In the US,
private label continued to gain share from brands,
with 54% of surveyed shoppers planning to purchase
more from retailer brands in the future, compared
with only 26% for branded products
2
.
HOW WE ARE RESPONDING:
We reduced our cost base through a comprehensive
cost reduction programme, which included the
closure of two production sites and the streamlining
of our UK organisation. This helped us offset inflation
pressures and become even more competitive in the
market, offering great value to our customers and
end consumers. We also focused on innovation and
development to optimise the value for consumers,
whilst continuing to deliver enhanced and exceptional
quality. For example, we increased the shelf-life of
the meals offer for a strategic customer in the US
to reduce product waste, enhancing value for both
retailers and consumers.
Consumers seeking out value
61%
of UK consumers choose
cheaper products to help
manage grocery spend
1
54%
of surveyed US shoppers plan
to increase their purchases of
own-label brands in the future
26%
US shoppers opting for
branded products in the future
2
1
Bakkavor State of the Nation report December 2023.
2
The Food Industry Association.
16
| Bakkavor Group plc | Annual Report & Accounts 2023
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
WHAT’S HAPPENING:
Cost of living pressures have led consumers to cut their
out-of-home spend, with 67% of UK shoppers expecting
to eat out less in the next few months than they did the
same time last year
1
. In the US, fresh food assortments,
particularly those that offer an alternative to restaurant
meals, are seeing increasing interest from consumers, with
65% of retailers stating that they will further increase their
Fresh Prepared Food (“FPF”) assortment over the next 12
months and 46% will commit more space to the category
3
.
HOW WE ARE RESPONDING:
We supported our UK customers in strengthening their meal
deal and takeaway offers, leveraging our breadth to deliver
new products across ready meals, pizza, salads and meal
accompaniments, as well as our US customers by adding
new recipes to our meals range. We also relaunched our
Pizza Express offer with a broader range and new and
improved recipes, all in a vibrant and stylish new packaging
to help the products stand out on our customers’ shelves.
Growth of at-home eating
WHAT’S HAPPENING:
Despite the challenges, consumers’ desire to elevate their
food experiences with high-quality and innovative products
remains a key driver for growth in the FPF market. In the
UK, the premium tier recorded growth within an overall
declining market, particularly towards the end of the year as
inflation started to ease. In the US, whilst value and price
were the main reason for shopping private label, around
half of consumers also did so because of taste and
quality
2
. In China, foodservice operators are revisiting
their food offer to differentiate themselves in an
increasingly crowded and competitive market.
HOW WE ARE RESPONDING:
In 2023, we launched more than 1,500 new products across
our three markets. Examples include our ‘Delicious Dessert
Company’ brand in the UK, where we broadened the range
with new, innovative products, and a refresh of the Oriental
meals range for a major customer that helped them regain
their number one position in the segment. In the US, we
launched a first-to-market sharing flatbread with cheddar
and jalapenos to exceptional consumer reviews. In China,
we introduced high-protein bento boxes under our Fresh
Kitchen brand to cater to the nutritional needs and taste
preferences of fitness enthusiasts and busy professionals.
Quality and innovation
still crucial
3
Supermarket News.
Bakkavor Group plc | Annual Report & Accounts 2023 |
17
OUR MARKETS
CONTINUED
WHAT’S HAPPENING:
Consumption in China bounced back in early 2023
following the lifting of Covid restrictions, although
the recovery fell below expectations as the year
progressed, with consumer confidence remaining
below pre-Covid levels. The foodservice channel
recorded exceptional 20.4% year-on-year growth in
2023
4
, partly due to low comparables in 2022 when the
country implemented strict Covid control measures.
The pandemic also helped modern grocery retailers
gain share in fresh food categories from more
traditional wet markets, as consumers sought and
continue to seek higher hygiene standards. The
long-term outlook for China remains positive, with
the middle-class and affluent population expected
to grow by 80 million by 2030
5
, driving increased
demand for our products.
China re-opening
HOW WE ARE RESPONDING:
We supported our customers by developing products
that are great value for money whilst preserving taste
and quality. In mainland China, we refreshed the
sandwich offer at a major café chain by developing six
new products that retain their quality when frozen.
This allows the customer to distribute them across
their store network in a cost-effective way.
We also launched a new meals and soup product
range for an international retailer, becoming their
sole supplier for those products in both China and
select East Asian markets.
READ MORE
pg 25.
4
The National Bureau of Statistics of China.
5
BCG, June 2023 – The Next Chapter in China’s Consumer Story.
18
| Bakkavor Group plc | Annual Report & Accounts 2023
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
WHAT’S HAPPENING:
Unseasonal and extreme weather events caused
disruption in the food supply chain, particularly
produce and fruits, and volatility in consumer
demand. Over the summer, a heatwave in southern
Europe led to scarcity in raw materials such as
watermelons, whilst unusually cold weather in the
UK led to a shift in demand towards more winter-
oriented products. Record rainfall, frosts and
heatwaves during the year damaged crops and
reduced the availability of high-quality raw
materials in the supply chain.
Extreme weather conditions
WHAT’S HAPPENING:
Labour availability remained tight in 2023, with
extremely low levels of unemployment across all
of our markets. Whilst wages increased at a record
rate throughout our industry, labour turnover
remains elevated, as companies compete for talent
and people seek more opportunities to switch jobs.
HOW WE ARE RESPONDING:
We continued to invest in our people’s wellbeing to
improve retention and support our recruiting efforts.
In the UK, we invested in out-of-cycle pay increases
to support our colleagues as they face cost of living
challenges, reviewed our benefits offer and ensured
our people knew how to access them, all whilst
embedding our values and new leadership structure
into our ways of working. This has driven improved
engagement scores and employee retention. In the US,
as part of our refreshed focus on profitability, we have
ensured that our business is resourced correctly
and have leveraged talent from our UK workforce in
support of this. Meanwhile, in China, we stepped up
our recruitment efforts to respond to the increase in
demand following the relaxing of Covid restrictions.
READ MORE
pg 6.
Workforce
engagement
HOW WE ARE RESPONDING:
Our diversified product mix in the UK provided
stability amongst shifts in consumer consumption
due to the cooler weather, with the decline in salads’
volumes partially offset by moderate growth in soups
and sauces. In China, we increased investments in
quality control which led to an increase in costs but
ensured that we continued to deliver best-in-class
quality for our customers. More broadly, we further
decreased our Group net carbon emissions by
5.3% year-on-year, as part of our effort to tackle
climate change.
READ MORE
pg 38.
5.3%
decrease in our Group
net carbon emissions
Bakkavor Group plc | Annual Report & Accounts 2023 |
19
OUR STRATEGY
Our clear and consistent
strategy
The strategy of the Group remains clear: to deliver profitable
and sustainable growth. We are focused on driving returns
from our market-leading position in the UK, whilst also
accelerating profitable growth in the US and China.
These priorities are underpinned by our relentless focus
on operational excellence and by being a trusted partner
for all of our stakeholders.
Last year we said we
needed to adopt new
tactics alongside our
established strategy,
and this is now driving
positive momentum
across the business.
Mike Edwards
Chief Executive Officer
20
| Bakkavor Group plc | Annual Report & Accounts 2023
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
Drive returns
by leveraging our
UK number one
market position
Deliver superior performance through operational excellence
Accelerate profitable
growth in the
US and China
Our strategy:
to deliver profitable
and sustainable
growth
EXCELLENCE
UK
INTERNATIONAL
Be a Trusted Partner for our people, customers, suppliers and communities
TRUST
READ MORE
pg 22.
READ MORE
pg 24.
READ MORE
pg 26.
READ MORE
pg 28.
OUR PURPOSE
To lead the way through flawless execution and by living our
values. To delight customers and consumers through fresh,
convenient and great-tasting food that we create every day.
OUR CULTURE
To empower and support all our stakeholders by living our values.
Colleagues
Customers
Suppliers
Investors
Communities
OUR KEY STAKEHOLDERS
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
Bakkavor Group plc | Annual Report & Accounts 2023 |
21
OUR STRATEGY
CONTINUED
UK
We strive to generate attractive financial returns through our superior scale
and capabilities in the UK Fresh Prepared Food (“FPF”) market.
Drive returns
by leveraging our UK number one market position
OUR KEY DRIVERS
•
Leverage our market insights,
product development expertise
and breadth of food production
capabilities to develop products
and propositions that delight our
customers and consumers.
•
Utilise our scale to develop, prepare
and distribute our products with a
more efficient and sustainable use
of resources.
•
Pursue organic and inorganic
growth opportunities across our
product categories by leaning on
our strong customer relationships,
deep market understanding and
solid financial footing.
•
Attract and develop talented
individuals to retain and further
strengthen our leading position
in the market.
WHAT WE HAVE ACHIEVED IN 2023
•
Gained market share in the FPF
market by delivering market-
leading service levels, targeted
innovation to ease the cost of living
crisis, and new business wins from
a fragile supply base.
•
Offset inbound inflation through a
combination of contractual pass-
through mechanisms, conventional
pricing negotiations and self-help
measures across factory
performance, value optimisation
and tight cost control.
•
Won new business across fresh-cut
fruit, desserts and pizza, equivalent
to more than £60m of incremental
revenue when fully onboarded by
early 2024 (for detail, see the case
study on the next page).
•
Led comprehensive range reviews
across select customers and
categories to improve value and
quality. For example, in early 2023
we relaunched the Oriental ready-
meals range for a strategic
customer, delivering 25 new SKUs
with a 99% service level, helping
the customer regain its number
one market position in the category.
•
Relaunched the retail offer for our
main licensed brand and expanded
our ‘The Delicious Dessert Company’
range, now the fifth largest brand in
the chilled desserts category.
•
Continue to collaborate with our
customers to manage input cost
inflation. In particular, this will
focus on labour through value
optimisation and efficiency
initiatives, and share potential
deflation in raw materials and
other input costs through
appropriate price reductions.
OUR FOCUS FOR 2024 AND BEYOND
•
Target new business wins with
competitive pricing and product
innovation, taking advantage of our
solid financial position and economies
of scale relative to our competitors.
READ MORE
pg 34.
•
Explore inorganic growth
opportunities to broaden our
capabilities, increase efficiency
through scale and bolster
our proposition to customers.
•
Ensure the long-term sustainability
of the business by investing in
our people through training and
career development programmes,
and by accessing new talent
through our apprenticeship
and graduate programmes.
READ MORE
pg 30.
22
| Bakkavor Group plc | Annual Report & Accounts 2023
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
Succeful onboarding
of new fresh-cut fruit business
STRATEGY IN ACTION
The urgency of the request meant
that speed and quality reassurance
were key. Within two weeks we
had developed a robust capacity
expansion and phased onboarding
plan, which led the customer to
award us the business.
The new business consisted of more
than 20 products, requiring expanded
processing capabilities, the redesign of
some factory product flows, additional
capacity and equipment, and the
recruitment of 240 new colleagues.
20+
new products onboarded
240
new colleagues in less
than three months
Our Operational, Commercial and
Procurement teams worked
collaboratively and at pace to ensure
the smooth delivery of the plan, and
by March, less than three months
after the initial customer enquiry, we
had successfully absorbed the entire
business into our existing fresh-cut
fruit site.
In January 2023, when a supplier of fresh-cut fruit was about to fall
into administration and stop production, we were approached by one
of its customers to take over a significant element of the business.
Bakkavor Group plc | Annual Report & Accounts 2023 |
23
OUR STRATEGY
CONTINUED
International
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 15 years. We use
our Group expertise to support our local teams and deliver profitable growth.
Accelerate profitable growth
in the US and China
OUR KEY DRIVERS
•
Combine deep local knowledge
with Group expertise to develop
innovative products that are tailored
to local tastes, evolve with changing
consumer preferences and meet
the highest food safety standards.
•
Broaden and strengthen existing
customer partnerships across
product categories, whilst building
a pipeline of new customers who
are committed to expanding their
fresh food offerings.
•
Ensure growth is sustainable and
translates into higher profits by:
—Developing robust capacity and
productivity plans.
—Training local talent on best-in-
class fresh food manufacturing.
•
Invest in new capacity, as and when
required, to respond to growing
demand and provide first-rate
service levels across regions.
WHAT WE HAVE ACHIEVED IN 2023
US
•
Refocused the business from
growth to profit by completing a
comprehensive cost base review,
delisting margin-dilutive products
and implementing tangible
performance improvement plans
at each site. This led to adjusted
operating profit increasing from
£0.1m in H1 to £3.3m in H2, with
good momentum entering 2024.
•
Continued to develop our offer across
categories and customers with new
and innovative products, such as a
first-to-market sharing bread at a
pre-eminent national retailer.
•
Restored market-leading customer
service levels across the business.
•
Strengthened our leadership team
with senior hires in operations and
commercial, supported by internal
transfers and secondments from
the UK.
READ MORE
pg 108.
CHINA
•
Delivered strong revenue growth
of 32.0% year-on-year, as the lifting
of Covid restrictions boosted
consumer spending, particularly
in the foodservice channel.
•
Continued to build our presence
in the retail channel, which grew
by 48% year-on-year and now
accounts for 20% of revenue,
up from less than 2% in 2018.
•
Reduced operating losses off the
back of higher factory utilisation,
partially offset by poor crop yields
and wage inflation.
•
Simplified our operations in China
by selling our minority stakes in
the bakery businesses La Rose
Noire Limited and Patisserie et
Chocolat Limited.
READ MORE
pg 36.
US
•
Maintain momentum in profitability
improvement, with a particular
emphasis on factory performance,
tight cost control and targeted
productivity investments.
•
Return the business to profitable
growth by deepening and
broadening our product range at
existing customers, diversifying
our customer base and leveraging
our strength in fresh meals to
further penetrate the market.
OUR FOCUS FOR 2024 AND BEYOND
•
Invest in new capacity to meet
growing demand and broaden our
geographical coverage, ensuring
competitive service levels for
our customers.
CHINA
•
Support existing and prospective
customers in their growth plans
and increase our share of wallet by
securing new business across our
category portfolio.
•
Continue to rebalance our sales
mix by expanding our presence
in the fast-growing premium
grocery channel.
•
Drive further margin
improvement through operating
leverage, business process
reviews and factory performance,
with the support of our UK
Operational Excellence team.
24
| Bakkavor Group plc | Annual Report & Accounts 2023
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
Transforming the sandwich offer
at a major café chain
STRATEGY IN ACTION
After several months of working
closely with the customer to review
multiple ideas, we launched six new
products across their retail estate
in the summer of 2023.
The range included three new bread
carriers which subsequently required
new packaging, production processes,
ingredients and a technical partnership
with a new critical upstream supplier.
Despite the complexity, we managed
to rapidly upscale production and
meet the launch deadline, which led
the customer to award us additional
business that had been previously
allocated to another supplier.
6
new products launched
across the store estate
in the summer of 2023
3
new bread carriers
included in the new range
One of our strategic customers in China, an iconic café chain,
wanted to refresh its sandwich offer.
Bakkavor Group plc | Annual Report & Accounts 2023 |
25
OUR STRATEGY
CONTINUED
Excellence
We invest in our colleagues and assets to generate operational efficiencies and
maintain the highest technical standards and service levels across our footprint.
Deliver superior performance
through operational excellence
OUR KEY DRIVERS
•
Identify and deliver opportunities to
improve efficiency through our highly
skilled Operational Excellence team.
•
Enhance productivity in our
operations by:
—Establishing a culture of
continuous improvement.
—Targeting investment in automation
and colleague training.
•
Maintain a resilient and efficient
global sourcing platform,
supported by our dedicated teams
in the UK, Spain and China.
•
Uphold the highest technical standards
of food safety and health and safety
for the benefit of our colleagues,
customers and consumers.
•
Sustain our market-leading service
levels through agile manufacturing,
contingency planning and a flexible
supply chain.
WHAT WE HAVE ACHIEVED IN 2023
•
Streamlined our UK and US
senior management teams and
consolidated our UK volumes by
closing our factories in Sutton
Bridge and Leicester, delivering
run-rate savings of £25m.
•
As part of our recently developed
Bakkavor Operating System:
—Completed the roll-out of our
smart manufacturing IT system
across the UK estate.
—Implemented several engineering
initiatives to reduce energy usage,
which helped us to deliver a step-
change in factory performance
and a further reduction in carbon
emissions.
•
Installed a new automated bakery
line at our UK Crewe site that
increased capacity, improved
productivity and lowered carbon
emissions (for detail, see the
case study on the next page).
•
Launched a new manufacturing
apprenticeship in the UK to
complement our award-winning
engineering programme. We
enrolled 65 people across all
functions in 2023/24 – the highest
ever apprenticeship intake.
READ MORE
pg 32.
•
Designed and deployed training
programmes on operational
excellence and lean manufacturing
across the UK and China.
•
Maintained industry-leading
technical standards across the
Group and provided best-in-class
service levels despite supply chain
disruption driven by extreme
weather events, notably in produce
(UK and China) and fruit (UK).
•
Continue the development of the
Bakkavor Operating System,
with a focus on UK food waste,
to generate efficiencies whilst
contributing to our sustainability
commitments.
•
Implement energy-efficient
solutions as part of the normal
end-of-life asset replacement
cycle, and support supply chain
resilience by incorporating
climate risk understanding into
raw material sourcing.
£25m
of run-rate savings on track
to be delivered through our
refreshed structure
OUR FOCUS FOR 2024 AND BEYOND
•
Further strengthen the UK talent
pipeline by introducing a new
engineering graduate programme,
as well as new manufacturing and
ESG undergraduate placement
programmes starting from 2024.
•
Support our US business in driving
better factory performance by
improving how we share talent and
know-how across our network and
upskilling the operational teams.
•
Deliver a step-change in
factory performance in China
by implementing lean
manufacturing practices and
investing in targeted automation,
with support from the UK
Operational Excellence team.
•
Maintain industry-leading food
safety and health and safety
standards through strict control
and regular training.
26
| Bakkavor Group plc | Annual Report & Accounts 2023
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
Introducing our new automated
craft bread production line
STRATEGY IN ACTION
£10m
investment that marries
capacity, efficiency and
sustainability
With the flatbread market growing,
we took the opportunity to invest
£10m in a new production line at
our UK Crewe site to improve
productivity, product quality and
consistency through automation.
This strategic investment was approved
by the Board after engaging with
Crewe’s Site Employee Forum (“SEF”),
ensuring the interests of our colleagues
were at the heart of the project.
A key part of the project was
replacing the existing nitrogen-based
chiller with a new energy-efficient
solution, which reduced both running
costs and carbon emissions. This
showcases how we are incorporating
our Trusted Partner ESG strategy into
our decision-making processes.
We have been the leader in chilled
breads for over a decade; nevertheless,
we continually look to strengthen our
capability, differentiate our products and
enhance productivity, as we strive for
excellence and superior performance.
READ MORE
pg 99.
In 2023, we installed a new high-speed automated bakery
line at our UK site in Crewe.
Bakkavor Group plc | Annual Report & Accounts 2023 |
27
OUR STRATEGY
CONTINUED
Trust
We strive to be a responsible, caring and Trusted Partner for all our stakeholders,
and a positive force in our interactions with the world around us.
Be a Trusted Partner
for our people, customers, suppliers
and communities
OUR KEY DRIVERS
•
Live our values by striving to do the right
thing for our colleagues, customers,
suppliers and communities.
•
Provide our people with a great
place to work where they feel
valued, included and inspired
to perform at their best.
•
Be a responsible global business
by reducing our environmental
footprint and maintaining high
ethical standards across our
supply chain, in collaboration with
our customers and suppliers.
•
Support our immediate communities
through charity partnerships and
local grassroots initiatives.
WHAT WE HAVE ACHIEVED IN 2023
•
Reduced Scope 1 and 2 net carbon
emissions by 5.3% year-on-year
and strengthened our Net Zero
ambition by committing to the Science
Based Targets initiative (“SBTi”).
•
Reduced UK food waste tonnage by
20.7% year-on-year through the
continued focus on waste reduction
and food redistribution.
•
Supported the UK Plastics Pact’s
2025 goals by eliminating 1,390
tonnes of plastic packaging in the
UK (an 8.0% reduction), sourcing
plastic with an average recycled
content of 52.9% and maintaining
a recyclability percentage of all
our packaging above 99%.
•
Maintained industry-leading health
and safety standards with 259 >7
day lost time accidents per 100k
employees, well below the industry
average of 764. We also continued
the roll-out of our Wellbeing
strategy with a range of initiatives,
including a menopause awareness
campaign and financial and mental
health advice sessions.
READ MORE
pg 44.
•
Increased employee engagement
scores and increased the frequency
of our Employee Engagement Survey
from every 18 months to annually.
•
Introduced a range of high-quality
meals and pizzas under our ‘Proud
to Be’ range into our staff shops,
ensuring our colleagues always
have access to our products at
discounted prices.
•
Launched our Effective Leadership
Development programme to
supplement our highly successful
Front-line Leaders programme and
continue to support our operational
team leaders.
READ MORE
pg 32.
•
Strengthened our partnership with
the Natasha Allergy Research
Foundation by doubling our annual
donation and extending our
commitment as a long-term charity
partner supporting their ongoing
groundbreaking research.
•
Collaborate with our customers
and suppliers in enabling the
climate transition in our value
chains through increasing
transparency and understanding
of climate impacts.
•
Continue working towards
our Champions 12.3 target of
reducing UK food waste in our UK
business through better tracking,
control and intervening actions.
20.7%
reduction of UK food waste
tonnage in 2023
•
Assess the most at-risk suppliers to
our UK business on their compliance
with our Supplier Code of Conduct
and continue a verification audit
process to identify and mitigate risks.
•
Continue to transform our staff shops
to provide further support to our
colleagues, expanding the number of
both Bakkavor and other products on
offer, so that our people have access
to a broad range of items.
OUR FOCUS FOR 2024 AND BEYOND
•
Further strengthen our leadership
development offer by launching
a new Foundation Leadership
programme that will be accessible
to all managers and team leaders.
•
Deliver against our science-based
targets in the near-term (2030)
and achieve Net Zero operational
emissions by 2040 and across the
value chain by 2050.
READ MORE
pg 50.
28
| Bakkavor Group plc | Annual Report & Accounts 2023
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
Doing our part
in tackling UK food insecurity
STRATEGY IN ACTION
The project aims to access surplus
food and redistribute it to those
needing it most, whilst reducing
carbon emissions.
We are working with some of our
customers and competitors, plus
food redistribution charities
FareShare and the Felix Project,
to manufacture and distribute our
nutritious and tasty meals to people
in need promptly and efficiently.
The overall alliance partnership’s
goal is to distribute one million meal
equivalents in 2024, doing our part
for the 13 million people in the UK
currently experiencing food poverty.
500,000
meals to be donated
by Bakkavor in 2024 as
part of The Coronation
Food Project
>35,000
equivalent meals already
contributed in December 2023
In November 2023 we joined The Coronation Food Project, an initiative inspired
by King Charles III to tackle UK food waste and food insecurity across the UK.
Bakkavor Group plc | Annual Report & Accounts 2023 |
29
OUR PEOPLE
Great people,
greater succe
We recognise the importance of
making Bakkavor a great place to
work, where all colleagues can feel
supported and fulfilled. Our values
are at the heart of this and provide
the guiding principles that shape
how we behave. By doing this, we
can all be proud to be Bakkavor.
Our people plan is driven by
employee feedback and aligned
to the commitments in our
Trusted Partner ESG strategy.
Donna-Maria Lee,
Chief People Officer
READ MORE
pg 44.
30
| Bakkavor Group plc | Annual Report & Accounts 2023
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
Our 2023 EES
highlights
This year’s EES highlighted some of our key strengths, namely
that our colleagues feel that:
•
They understand the goals of their site or function.
•
Bakkavor provides them with a safe working environment.
•
They can be themselves whilst at work.
It was also encouraging to see that the areas we had focused on
driving change in this year saw significant improvements, with:
Our Group-wide Employee Engagement Survey (“EES”) is vital to informing our planning
around what matters most to our global network of c.18,000 colleagues.
This year, we moved our EES from an 18-month cycle to
annually, providing more regular feedback to inform our
priorities. We saw excellent levels of survey participation,
up 2% since the already high response rates in 2022.
We identified four 2023 focus areas for action planning,
programmes and employee-led initiatives; these are
detailed on the next two pages. The improvements we
have made this year have delivered a step on in employee
engagement and the insights gained will help to inform our
2024 focus and the strengthening of our Bakkavor culture.
88%
survey response rate
7.1%
more colleagues understand
Bakkavor values
6.2%
more colleagues understand
what our Site Employee
Forums (“SEF”) do and how
they can help
5.5%
more colleagues understand
the action we are taking
on important social and
environmental issues
71.8%
overall score
Bakkavor Group plc | Annual Report & Accounts 2023 |
31
1
2
OUR PEOPLE
CONTINUED
Our
people progre
in 2023
Providing
opportunities for
personal growth
and development
We are always looking to improve
our colleague learning offering, with
72.2% of our colleagues indicating
that they have received the training
needed to do their job well.
LEADERSHIP DEVELOPMENT
Following the 2022 launch of
our Front-line Leaders and
Effective Leadership Development
programmes for operational
team leaders, a new Foundation
Leadership programme has been
developed for 2024. This will be
delivered to all UK junior leaders
in an accessible modular format,
focusing on key leadership skills
such as effective communication and
feedback, motivation and behaviours,
change management, problem-
solving and decision-making.
FEMALE MENTORING
In an industry significantly under-
represented by women, particularly
at more senior levels, this is a key
part of our leadership development.
Following the successful launch of
our 2022 mentoring programme,
we have established a Female
Networking Group which began in
December 2023. Our I&D Forum
also steers our business across a
wide range of matters.
READ MORE
pg 38.
ONBOARDING MANUFACTURING
PROGRAMME
We have made our new joiners’
induction more interactive, visual
and accessible by installing a
refreshed digital infrastructure
with online learning systems and
tools. This earned us the 2023 Gold
Award for the ‘Best Technology-
based Onboarding Programme’ by
the Learning Technologies Awards.
Responding
to change effectively and embracing
new ways of doing things
One of our key priorities centred on
embedding our new leadership to
clearly communicate our strategy
and improve ways of working. In
particular, we restructured our UK
leadership team and streamlined
the UK from four to two sectors.
SKILLS DEVELOPMENT
Our online portal provides over 100
courses in 17 languages, available
24/7 for UK salaried employees. A
careers portal will further strengthen
the link between skills development
and role progression.
EARLY CAREERS
We continue to invest in our talent
pipeline through our apprenticeship,
graduate and undergraduate
placements, with 14 graduates recruited
in 2023. In response to skill shortages
within certain manufacturing
disciplines, our Engineering Academy
provides targeted recruitment,
development and growth opportunities.
This has seen us triple our intake of
engineering apprentices over the last
three years. We were also voted the top
FMCG company for apprentices for the
fourth year running by TheJobCrowd.
This was achieved by:
•
CEO quarterly business updates
for senior leaders across the UK,
US and China.
•
A monthly UK brief on Group and site
news to all factory-based employees.
•
Direct online messaging to UK factory
workers through a digital portal.
•
Re-launch of SEF with a 6.2%
rise in understanding what our
forums do and how they can help.
For 2024, these communication
channels will continue with greater
emphasis on employee suggestions
for innovative ways of working
together and making improvements
across the business.
32
| Bakkavor Group plc | Annual Report & Accounts 2023
3
4
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
Embedding
our values
Our values are a key enabler for
our colleagues to collaborate
effectively and deliver our strategy.
Following the launch of our
refreshed ‘Proud to Be’ values
in 2022, our priority in 2023 was
to continue to embed these
values into our ways of working.
This included the launch of a
UK-wide values recognition
programme, and a new ‘Better
Behaviours, Better Bakkavor’
workshop to support an increased
focus on our ‘Respect and trust
each other’ value.
To support colleagues through
cost of living challenges, we have
continued to offer competitive
pay and relevant benefits for all,
with staff shops offering our first
Bakkavor-branded discounted
food for UK employees.
We continue to clearly communicate
our full range of benefits, discounts
and wellbeing provision through
webinars and site roadshows.
As we move into 2024, we remain
focused on understanding what
benefits matter most across our
diverse workforce.
Our efforts have resulted in 71.5%
agreeing to the question ‘I know how
to access support for my health and
wellbeing’, a 1.5% uplift from 2022.
Providing
relevant
colleague benefits
READ MORE
pg 92.
SUPPORTING WELLBEING
We have continued to focus
on our strategy’s three core
pillars of physical, emotional
and financial wellbeing. Our
network of c.90 Wellbeing
Champions and Occupational
Health teams are instrumental
in these efforts.
As part of our Wellbeing Month,
we launched our new Mental
Health Policy and signed up
to the Mental Health at Work
Commitment, with training
sessions and resources
continuing into 2024.
READ MORE
pg 44.
Respect and
trust each other
BETTER BEHAVIOURS,
BETTER BAKKAVOR
In response to the 2022 EES, we
developed a ‘Better Behaviours,
Better Bakkavor’ workshop
which explores ways to further
inform employees around
behaviours which do not align
with our values. We prioritised
our front-line factory employees
where we identified a greater
need for support in this area.
Feedback from these sessions
will inform our new Foundation
Leadership programme.
Be proud of
what we do
‘PROUD TO BE’ AWARDS
We’ve made great progress in
developing our annual awards ceremony
to recognise colleagues going above and
beyond to live and breathe our values.
Within the UK and US, we’ve also
launched a monthly ‘Proud to Be’
recognition and nomination scheme.
Bakkavor Group plc | Annual Report & Accounts 2023 |
33
DIVISIONAL REVIEW: UK, US, CHINA
Overview:
United Kingdom
UK FINANCIAL HIGHLIGHTS
£m
2023
2022
Change
Reported revenue
1,852.7
1,783.1
3.9%
Like-for-like revenue
1
1,852.7
1,752.3
5.7%
Adjusted operating profit
1
93.9
92.7
1.3%
Adjusted operating
profit margin
1
5.1%
5.2%
(10bps)
Operating profit
96.7
54.6
77.1%
Operating profit margin
5.2%
3.1%
210bps
1
Alternative Performance Measures are referred to as ‘like-for-like’, ‘adjusted’ and
‘underlying’ and are applied consistently throughout this document. These are
defined in full and reconciled to the reported statutory measures in Note 36.
Key:
Head office
Factory,
distribution centre,
growing unit
Strong execution of our plan drove market share
gains and a robust performance
TRADING PERFORMANCE
Like-for-like (“LFL”) revenue
increased by 5.7% to £1,852.7m (2022:
£1,752.3m). Reported revenue, which
includes the impact of a 53rd week in
2022, was up 3.9% to £1,852.7m.
Growth continued to be led by pricing
as inflationary pressures persisted.
We again outperformed the market,
which saw a 2.2% decline in volume
compared to our reduction of only
0.5% year-on-year.
A combination of collaborative pricing
discussions with our customers and
our plan to protect profits, which we
launched in November 2022, meant
we successfully mitigated ongoing
inflationary headwinds. This resulted in
adjusted operating profit being up £1.2m
to £93.9m (2022: £92.7m), with margins
broadly flat at 5.1% (2022: 5.2%).
Operating profit of £96.7m includes
exceptional income of £2.8m (2022:
£36.6m expense) related to the release
of provisions previously held for our
restructuring activity, and therefore
was up £42.1m (2022: £54.6m).
RENEWED AGILITY AND FOCUS
DRIVING MARKET OUTPERFORMANCE
The Fresh Prepared Food (“FPF”)
market remains challenging and has
continued to be impacted by changing
consumer behaviours. Shoppers are
focused on centre-of-plate products
and ‘good value’ purchases as a
reaction to the persistent cost of living
pressures. Consumer confidence
slowly improved towards the end of
the year as inflationary pressures
eased slightly, resulting in a slower
pace of volume.
The desserts category was the
least resilient because of its more
discretionary nature. It was also a
category which saw more inflation
passed through given the raw material
mix (e.g. dairy having experienced
particularly high inflation) and reduced
promotions due to the new high fat, salt
and sugar (“HFSS”) legislation. Whilst
we saw a decline in our volumes, we
were significantly ahead of the market.
This outperformance was driven by
new business wins in cream cakes and
hot desserts, as well as growth in
our ‘The Delicious Dessert Company’
brand (“DDC”). The brand targets a
new, younger consumer compared to
the more traditional dessert shopper.
We extended our DDC product range
and secured stronger distribution
across retailers, with us now having
products listed in over 1,600 stores.
We also outperformed the market
in salads, although as a category it
was negatively impacted by shopper
behaviour. Customers switched to
cheaper whole-head leaf options and
demand was reduced by the cooler
weather seen during the summer.
A number of industry-wide availability
issues also disrupted the category.
Our ability to navigate these
availability challenges efficiently and
maintain excellent service levels for
our customers was a key factor in
driving our performance compared
to the market. We also saw the
benefit of onboarding new fresh-cut
fruit business at the start of the year.
34
| Bakkavor Group plc | Annual Report & Accounts 2023
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
Meals was a more resilient category
and performed better than the wider
market, with consumers switching
from eating out and takeaway options
to at-home dining alternatives.
Our products continue to provide
great value to consumers and our
innovation also boosted sales.
For example, the re-development
of the Oriental range for our biggest
customer delivered incremental
sales growth, re-establishing their
market leadership in this category.
The cooler summer also benefitted
our hot eating product ranges.
The pizza and bread category
continued to see volume growth
during the year, predominantly driven
by ‘value’ ranges and meal deals as
consumers, again, moved away from
the more expensive takeaway and
restaurant options. Our business mix
is skewed towards the mid-tier and
premium ranges, as such this was
the one category in which we did not
gain market share.
REFRESHED APPROACH
FUNDAMENTAL TO PROTECTING
OUR PROFITABILITY
Industry-wide supply chain challenges
persisted throughout the year as
multiple countries were affected
by extreme weather conditions,
impacting the supply and quality of
fresh raw materials. Utilising our
scale and agility, we consistently
delivered excellent service levels
to our customers, ensuring good
availability of our products instore.
The reliability we provide also helped
us to win new business across several
categories during the year. Our
targeted innovation continued to
focus on changing consumer needs
and has delivered ranges that
outperformed for our customers.
Although inflationary pressures
lessened in the second half, driven
by reduced raw material headwinds,
they remained high and resulted
in c.£130m of inflation across our
UK cost base during the year. This
is in addition to the c.£200m we
had already faced in 2022. Through
collaborative pricing discussions
with our customers, we were able to
recover a large portion, but not all, of
this increased cost. It was ‘self-help’
that enabled us to bridge the remaining
gap and protect our profitability.
The roll-out of our new manufacturing
system across all our UK factories
was completed in the first half of the
year. This system provides live data,
which has underpinned the strong
operational improvement in the year
and signposts future opportunities to
remove bottlenecks and points of
inefficiency. These insights, combined
with our renewed organisational
structure, are enabling us to act with
significantly greater agility and drive
operational synergies and efficiencies.
The operational alignment around
our Meals and Bakery sectors has
enabled more dynamic movements
of volume between sites, which allows
us to better manage production,
especially during peak periods.
ENHANCED FOCUS ON CAPITAL
INVESTMENTS
Although we limited our capital spend
during the year, we continued to
enhance our operations through
targeted investments which focused
on maintaining the high standards in
our factories and driving productivity
improvements. Whilst many of these
investments are relatively small, we
have invested £10m in a new bakery
line at our Crewe factory. This
high-speed line reduces our reliance
on labour and has a low-carbon,
energy-efficient chilling process to
deliver both cost and carbon savings.
In addition to this, we have invested
in capacity across a number of sites.
We invested in cut-fruit capacity to
accommodate a new business win,
which we successfully onboarded
in Q1. We also continued to invest
in desserts capacity and capability.
In the first half of 2023, we invested
in our three remaining desserts
factories to accommodate volumes
transferring following the closure of
our site in Leicester. The next phase of
our desserts investment is underway
to facilitate the launch of a new
business win, expected in Q2 2024.
Bakkavor Group plc | Annual Report & Accounts 2023 |
35
DIVISIONAL REVIEW: UK, US, CHINA
CONTINUED
Overview:
United States
US FINANCIAL HIGHLIGHTS
£m
2023
2022
Change
Reported revenue
229.4
255.3
(10.1%)
Like-for-like revenue
1
230.6
251.7
(8.4%)
Adjusted operating profit
1
3.4
3.3
3.0%
Adjusted operating
profit margin
1
1.5%
1.3%
20bps
Operating profit/(loss)
0.5
(0.5)
200%
Operating profit/(loss)
margin
0.2%
(0.2%)
40bps
1
Alternative Performance Measures are referred to as ‘like-for-like’, ‘adjusted’ and
‘underlying’ and are applied consistently throughout this document. These are
defined in full and reconciled to the reported statutory measures in Note 36.
Key:
Head office
Factory
Refreshed priorities delivering operational
performance and profitability
TRADING PERFORMANCE
LFL revenue was down 8.4% to
£230.6m, as we shifted our focus from
growth to profit. The market’s potential
remains strong and, excluding business
that has been exited, we delivered sales
growth of c.7%. Reported revenue,
which includes the impact of a 53rd
week in 2022 and the effect of currency,
was down 10.1% to £229.4m.
The Group continued to build profitability
throughout the year, moving from £0.1m
in the first half to delivering £3.3m in the
second half. This resulted in an adjusted
operating profit of £3.4m, with 1.5%
margin, for the full year. Adjusted
operating profit excludes exceptional
costs of £2.9m (2022: £3.8m) relating
to impairment charges.
STRONG PROGRESS DRIVEN BY
OUR REFRESHED PRIORITIES
Our primary focus in 2023 has been on
rebuilding sustainable profitability by
focusing on the basics of operational
performance, ahead of pursuing sales
growth in the short-term. Our new
leadership team was put in place
during the first half, comprising a mix
of excellent local US talent and UK
colleagues. Developing stronger
links with the UK across all functions
is a key area of focus as we rebuild
the business.
The new team has already made
significant progress in improving
business performance and customer
engagement, including through
enhancing the service levels
delivered to our customers and
navigating challenges faced during
the year with increased collaboration
and communication. Our technical
performance has also improved, with
all our factories achieving ‘Excellent’
Safe Quality Food (“SQF”) scores. We
also resolved the previously reported
customer contractual dispute at one
of our sites.
We have reviewed our product lines
with greater granularity, and have
chosen to delist certain lower-
margin, products as part of our drive
to focus on profitability. Finally, we
have regained control of our cost
base, establishing a stronger
platform for profitable growth with an
emphasis on controlling overheads
and driving factory performance.
36
| Bakkavor Group plc | Annual Report & Accounts 2023
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
Overview:
China
CHINA FINANCIAL HIGHLIGHTS
£m
2023
2022
Change
Reported revenue
121.7
100.8
20.7%
Like-for-like revenue
1
130.9
99.2
32.0%
Adjusted operating loss
1
(3.0)
(6.6)
54.5%
Adjusted operating
loss margin
1
(2.5%)
(6.5%)
400bps
Operating loss
(0.1)
(16.3)
99.4%
Operating loss margin
(0.1%)
(16.2%)
1610bps
1
Alternative Performance Measures are referred to as ‘like-for-like’, ‘adjusted’ and
‘underlying’ and are applied consistently throughout this document. These are
defined in full and reconciled to the reported statutory measures in Note 36.
Key:
Head office
Factory, farm
Self-funding through building market share
and driving operational efficiencies
TRADING PERFORMANCE
Trading in China continued to recover
through 2023, with LFL revenue of
£130.9m, up 32.0%. Reported revenue,
which includes the impact of a 53rd
week in 2022 and the effect of currency,
increased by 20.7% to £121.7m. Revenue
growth was primarily driven by
increased volumes in the period, which
benefitted from continued post-Covid
recovery. Growth was also due to
market share gains with our established
foodservice customers and further
diversification into the retail channel.
Increased sales, together with
improved efficiencies, supported an
improvement in operating losses,
with an adjusted operating loss of
£3.0m (£3.6m lower than last year).
Adjusted operating loss excludes:
£2.9m of exceptional income, which
comprised £1.5m of proceeds from
the sale and leaseback of a property
in Hong Kong; and a £1.4m net gain
on the sale of our two associate
investments. We are pleased that
these two transactions have
simplified our China operations.
A REFRESHED FOCUS ON
LEVERAGING OUR EXISTING
FOOTPRINT
We have seen improved performance
from our China business as the
consumer environment continued
to stabilise following the relaxation
of Covid-related restrictions in
December 2022. Without the volatility
created by lockdowns we have been
able to drive margin improvement
through better operational efficiency
and more stable production rates.
We have continued to make further
progress with diversifying our revenue
by further developing our retail
channels, which grew 48% year-on-
year and now account for c.20% of our
sales. We have also seen significant
expansion in the foodservice market,
with both international and domestic
players continuing to open stores at
pace. In this context, we have seen
strong growth in our Bakery business,
which operated at capacity for the entire
year, as we supported key customers
in the expansion of their footprints and
increased distribution of our product.
The benefit of our efficiency gains
has also helped to mitigate the
impact of poor ingredient yields,
driven by extreme weather, and the
recurring challenge of wage inflation.
The labour market has remained
tight, but we continue to manage
this effectively without disruption.
Our strategic investment in the
region is complete and we continue
to maintain a tight control of capital
spend. As a result, the business is now
cash-generative and self-funding.
Bakkavor Group plc | Annual Report & Accounts 2023 |
37
AN OVERVIEW OF OUR ESG REPORTING
This section summarises our Trusted Partner ESG
strategy and progress in 2023, as well as our focus
going forward. All data shown is for the calendar
year 2023 and at a Group level, unless specified.
Executive summary
39
ESG governance
39
Trusted Partner ESG strategy focus areas:
•
Responsible Sourcing in our Supply Chain
42
•
Sustainability and Innovation in our Operations
43
•
Engagement and Wellbeing in our Workplaces
and Communities
44
Related policies and documents
45
Non-financial and sustainability
information statement
46
Trusted Partner:
positive progress and
science-based targets
38
| Bakkavor Group plc | Annual Report & Accounts 2023
ESG: TRUSTED PARTNER
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
Trusted Partner is our ESG strategy and
we have a clear plan to deliver progress
across Responsible Sourcing in our Supply
Chain, Sustainability and Innovation in our
Operations, and Engagement and Wellbeing
in our Workplaces and Communities.
EXECUTIVE SUMMARY
‘Trust’ is a core pillar in our Group
strategy as it is key to building
sustainable growth. Trusted Partner
is our approach for defining action
and delivering progress on the
critical issues that matter most to our
stakeholders and society, as well as
increasing the resilience of our business.
Trusted Partner has been informed
through a materiality assessment,
last conducted in 2022. Following this
refreshed insight, we sharpened our
focus on three strategic priority areas:
Climate and Net Zero, UK Food Waste,
and Environmentally Sustainable
Sourcing, whilst continuing to work
towards the objectives of our other
material ESG topics through our
business functions.
2023 saw further progress in
embedding ESG across the business,
and as a result, Bakkavor has seen
positive progress in all four of our
core non-financial KPIs. Performance
against each of these metrics
continues to be tracked and reported
to senior management regularly. This,
coupled with dedicated training held
for the Group Board, has increased
understanding and ensured we
have the ability and accountability
for driving performance.
READ MORE
pg 6.
During the year we set updated climate
targets that align with the Science
Based Targets initiative (“SBTi”).
These will be validated in Q2 2024.
READ MORE
pg 50.
The Board-level ESG Committee
continued to oversee our agenda and
hold us accountable, meeting four
times during the year, including to
review and approve our science-
based climate targets.
To further drive performance, the
Board approved new ESG-related
incentives: UK food waste performance
as a measure within the STIP and
carbon emissions reductions within
the LTIP scheme.
READ MORE
pg 124.
Our ESG ambitions will require
collaboration across the food industry.
Partnerships with our customers
on sustainability topics are vital to
delivering positive outcomes, and
we engaged with them closely and
transparently through forums,
multistakeholder initiatives, as well
as being a routine part of commercial
conversations.
Similarly, we maintained two-way
engagement on ESG with our suppliers,
with an update to our Supplier Code of
Conduct. We embedded ESG awareness
within our business through events and
workshops. We also communicated to
investors through our financial results
calendar and one-to-one discussions.
READ MORE
pg 64.
We have reported against the recommendations of the
Task Force on Climate-related Financial Disclosures (“TCFD”).
READ MORE
pg 50.
ESG GOVERNANCE
We have a clear governance
framework in place to drive and
oversee our progress in relation
to climate-related issues.
READ MORE
pg 57.
Our ESG Committee and function
sit within the Group’s overall
governance framework.
READ MORE
pg 87.
For ESG and sustainability enquiries:
ESG@bakkavor.com
GROUP BOARD
ESG COMMITTEE
ESG FUNCTION
ESG Sponsor:
Ben Waldron,
CFO and Asia CEO
Chair:
Umran Beba,
Independent Non-executive
Director
Chair:
Lee Miley,
UK Finance Director
ESG Sponsor:
Ben Waldron,
CFO and Asia CEO
Primary ESG internal
governance body/organisation
Supporting ESG governance
structures
Monitoring and reporting of
ESG progress
Key
SENIOR EXECUTIVE TEAM
Bakkavor Group plc | Annual Report & Accounts 2023 |
39
Responsible
Sourcing
in our Supply Chain
For our business a resilient supply chain is critical,
as is the future sustainability of our food systems.
We work with growers and partners to minimise
environmental impacts whilst supporting the rights
and livelihoods of the millions employed in our food
production worldwide.
Bakkavor’s Supplier Code of Conduct is at the heart
of our supply chain engagement approach. This code,
a requirement for all suppliers to Bakkavor UK,
outlines the standards that we expect to be met and
forms part of our supplier selection process. Key
areas include Human Rights, Ingredient Integrity and
Environmental Sustainability. The Code, along with
our Deforestation Policy, Human Rights Policy and
Animal Welfare Policy, can be found at bakkavor.
com/en/esg/policies-and-documents.
Industry collaboration in this area is extremely
important in order to address system-wide issues.
Bakkavor is active in multistakeholder initiatives
including the UK Soy Manifesto, the Ethical Trading
Initiative, the Food Network for Ethical Trade
(“FNET”) and the Spanish Ethical Trade Forum.
Our Responsible Sourcing strategy is overseen by a
governance group that includes senior representation
from the Procurement, Finance, ESG and Technical
functions, who oversee the day-to-day implementation of
our strategy via the Responsible Sourcing action team.
Encompasses two distinct but connected
material issues: Supply Chain Human Rights
and Environmentally Sustainable Sourcing.
Trusted Partner
is focused on three areas:
Responsible
Sourcing
in our Supply Chain
Sustainability
and Innovation
in our Operations
and Webeing
in our Workplaces
and Communities
Engagement
40
| Bakkavor Group plc | Annual Report & Accounts 2023
ESG: TRUSTED PARTNER
CONTINUED
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
Sustainability
and Innovation
in our Operations
This includes two of our strategic priorities: Climate
and Net Zero and UK Food Waste, as well as Impact of
Packaging; Sustainable and Healthier Products; and
Water Use and Management. Operational efficiency
is part of our business’s ‘Excellence’ pillar within our
Group strategy. Our ESG objectives are integrated
with this and Group net carbon emissions and UK food
waste are two of our non-financial KPIs. Progress in
reducing these is an indicator of more sustainable and
efficient food manufacturing operations.
In 2023 we reaffirmed our Net Zero by 2040 ambition by
committing to the SBTi and setting a goal to reach Net
Zero greenhouse gas emissions across the value chain
by 2050, as well as reducing net Scope 1 and 2 emissions
by 42% and Scope 3 emissions from products and
services also by 42% by 2030 (2021 baseline).
READ MORE
pg 50.
This is part of a significant first step in developing
our climate transition plan, which will set out our
roadmap for the years to come, and our existing
utility efficiency programme continues to help
reduce emissions in our operations.
READ MORE
pg 52.
To drive performance towards our climate and UK
food waste goals (halving our UK food waste by 2030
from a 2017 baseline), we have updated our incentives
schemes by including an update to our STIP and LTIP.
READ MORE
pg 124.
Encompasses our approach to minimising
the environmental impacts of our direct
operations and increasing the sustainability
of the food we manufacture.
The health and safety of our colleagues is our biggest
priority, and as such UK >7 day lost-time accidents is
one of our non-financial KPIs. We strive for zero harm
and acknowledge that there are always opportunities
to learn and improve. Our Global Health and Safety
Management Principles standardise best practice
across all our sites, leveraging ISO 14001, and the
Board consistently monitors progress.
READ MORE
pg 111.
We aim to provide an inclusive environment where
colleagues can thrive, supporting their physical,
emotional and financial wellbeing. Our cross-functional
Wellbeing Steering Committee, led by our Chief People
Officer (“CPO”), delivers our Wellbeing strategy and
objectives. Our I&D Forum, chaired by our Company
Secretary and General Counsel, steers our strategic
direction on becoming a more inclusive and diverse
business. Our long-running Human Rights and Ethical
programme, which is rooted in best practice such as
the UN Guiding Principles and the ETI Base Code,
ensures we have robust controls to minimise labour
and human rights risks in our own operations. It is
driven by the Ethical Trade team and overseen by the
CPO. We hold ‘Verified Advanced’ Business Partner
status with Stronger Together – a multistakeholder
initiative working to tackle modern slavery. We use its
Progress Monitoring Tool to assess the effectiveness
of our Ethical Trade programme.
We seek to engage with all of our colleagues to
ensure their opinions are heard and acted upon.
The Community Engagement workstream
coordinates our three-year corporate charity
programme with partners GroceryAid and the
Natasha Allergy Research Foundation.
Encompasses how we support our diverse
and talented colleagues and people in our
workplaces and communities.
and Webeing
in our Workplaces
and Communities
Engagement
Bakkavor Group plc | Annual Report & Accounts 2023 |
41
ISSUE
COMMITMENTS
STATUS
UPDATE
Environmentally
Sustainable
Sourcing
100% deforestation- and
conversion-free sourcing of
palm oil, soy, beef and wood
pulp by the end of 2025 (UK,
2020 cut-off date).
We offset UK soy footprint with credits purchased
through RTRS
1
and the Group is a signatory to the UK
Soy Manifesto. All UK-sourced palm oil is RSPO
2
certified. In 2023, we continued to report and manage
soy and palm oil sourcing with support from advisers
3Keel and responded to the Carbon Disclosure
Project’s (“CDP”) Forests questionnaires
3
for the
second time. All cardboard used for primary and
secondary packaging is sourced from sustainable
wood pulp (Programme for the Endorsement of
Forest Certification (“PEFC”)/FSC chain of custody
certification). All beef used in the UK business comes
from retailer-approved European farms which are
low-risk for deforestation.
Formalise a policy on our
supplier expectations around
animal welfare.
We released our Animal Welfare Policy to relevant
suppliers in June 2023. It can be found at bakkavor.
com/en/esg/esg-reporting.
100% eggs from cage-free
sources by 2025 in the UK,
and Group-wide by 2027.
UK: 80% (77% in 2022).
China: 6% (0% in 2022).
US: 90% (84% in 2022).
Supply Chain
Human Rights
Work collaboratively with
suppliers on any breaches
of our Code of Conduct to
develop and implement
a clear and appropriate
corrective action plan
(UK, ongoing).
In 2023 our Supplier Code of Conduct was sent to all
raw materials suppliers to Bakkavor UK along with
environmental self-assessment questionnaires to
assess compliance.
Following this assessment, we began an audit process
to verify compliance amongst our higher-risk and
strategic suppliers. We will utilise these findings
alongside third-party data, industry intelligence,
ethical audits and supplier visit reports to address
any issues identified. We will then act to mitigate
our most material and salient human rights risks.
Support supply chain
engagement within our US
and China businesses through
our Group Supplier Conduct
Policy (2023 and ongoing).
In 2023 we prioritised increasing our understanding
of our supply base. This focused on supporting our global
Scope 3 carbon footprint and value chain assessment.
In 2024, we will evaluate the most appropriate
methodology to expand our responsible sourcing
ambitions to our international businesses.
Responsible Sourcing
in our Supply Chain
PROGRESS AGAINST OUR TARGETS AND COMMITMENTS
Strategic priority
Achieved
Non-financial KPI
On track
Work to do
1
Round Table on Responsible Soy.
2
Round Table on Sustainable Palm Oil.
3
CDP Forests questionnaire: cdp.net/en/responses/1362/Bakkavor-Group.
42
| Bakkavor Group plc | Annual Report & Accounts 2023
ESG: TRUSTED PARTNER
CONTINUED
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
ISSUE
COMMITMENTS
STATUS
UPDATE
Climate and
Net Zero
Achieve Net Zero carbon
emissions in our Group
operations by 2040.
READ MORE
pg 50.
Scope 1 and 2 Group net carbon emissions reduced by
5.3% in 2023, totalling a 23.2% reduction since 2021.
Bakkavor expanded Scope 3 measurement to our
US and China businesses, and saw positive progress
despite increased volumes across the Group.
READ MORE
pg 59.
Optimise operational water
intensity whilst maintaining
product quality and integrity.
Bakkavor reports water consumption through our CDP
Water Security submission
4
, the most recent of which
reports on data for 2022. This showed a reduction in
consumption of 4% compared to 2021 and received a
disclosure score of B-.
Food Waste
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, UK).
In 2023 we began the roll-out of waste tracking and
elimination project sites to further measure and
control UK food waste in real-time as part of our
Operational Excellence programme. As a result, UK
food waste reduced by 150 bps to 6.6% of total input
(2022: 8.1%), which is a reduction of 7,960 tonnes.
Since 2017 we have reduced UK food waste by 19,471
tonnes, a 39.0% reduction.
Impact of Packaging
Support progress towards
achieving the UK Plastics
Pact’s 2025 industry goals:
•
Eliminate problematic
plastics.
•
100% reusable or recyclable
plastic packaging.
•
30%+ average recycled
content in plastic packaging.
In 2023 we eliminated 1,390 tonnes of plastic from
our products in the UK – an 8% reduction in volume
in the year.
99.7% of our UK product packaging is recyclable.
The average recycled content of our UK plastic
volume is 52.9% (the same proportion as in 2022).
Sustainable Product
Development
Meet customers’ nutrition
targets on salt, sugar,
saturated fat and overall
calories through
reformulation (ongoing).
In 2023, 58% of our products are considered healthier
options
5
. This is down from 62% in 2022 due to new
product ranges, however now 90% of our products
(2022: 83%) are compliant with the Food Standard
Agency’s salt reduction targets for 2024.
Sustainability and Innovation
in our Operations
PROGRESS AGAINST OUR TARGETS AND COMMITMENTS
4
CDP Climate and Water questionnaires: cdp.net/en/responses/1362/Bakkavor-Group.
5
As defined by the UK Department of Health’s Nutrient Profiling Model.
Strategic priority
Achieved
Non-financial KPI
On track
Work to do
Bakkavor Group plc | Annual Report & Accounts 2023 |
43
ISSUE
COMMITMENTS
STATUS
UPDATE
Colleague
Health
and Safety
Uphold our commitment to
health and safety, targeting
zero serious accidents across
the Group.
Major accidents in the UK increased by 23.1% to 48 per
100k employees
6
. There was 1 major in the US (108 per
100k employees) and none in China. There were no
fatalities in 2023 across the Group.
Continue to outperform UK
industry averages on numbers
of major accidents and >7 days
lost-time accidents.
In 2023 UK >7 day lost-time accidents reduced by
19.3% to 259 per 100k employees (2022: 321),
outperforming the Health and Safety Executive’s
(“HSEs”) food industry benchmark
7
, by 66.1%.
READ MORE
pg 6.
Be recognised by our
colleagues as supporting them
to achieve positive wellbeing.
Our Wellbeing strategy continued in 2023, including
a range of campaigns focused on supporting our
colleagues’ financial, emotional and physical wellbeing.
Driven by our Wellbeing Champions at site level, we
saw an improvement in colleague awareness of the
wellbeing support we provide through our Employee
Engagement Survey. Some examples of activity this
year include financial advice sessions, menopause
awareness events and a ‘Know Your Numbers’
awareness week. In November we launched Bakkavor’s
first Wellbeing Month to further communicate our
offering to colleagues, with a particular focus and
commitment on mental health.
Engagement,
Development
and Retention
Promote an inclusive
working environment,
where differences are
valued and individuals feel
they can be themselves.
The I&D Forum ran a programme of events through
2023 to promote inclusive behaviours. From
highlighting inspirational stories during UK Black
History Month, to sharing unconscious bias awareness
training during Pride Month, and showcasing our
own heritages during Celebrate Your Culture at Work
Week in July. 75.7% of employees feel they can be
themselves at work.
Conduct an annual Group-
wide Employee Engagement
Survey (“EES”), aiming for an
overall employee engagement
score above industry average.
Our 2023 EES response rate was 88%, a 2% increase
on the previous year (86% in 2022).
READ MORE
pg 30.
Engagement and Webeing
in our Workplaces and Communities
PROGRESS AGAINST OUR TARGETS AND COMMITMENTS
Strategic priority
Achieved
Non-financial KPI
On track
Work to do
6
Number of ‘major’ accidents and specified injuries as defined by the UK Health and Safety Executive.
7
UK HSE industry averages: hse.gov.uk/statistics/tables/index.htm#riddor.
44
| Bakkavor Group plc | Annual Report & Accounts 2023
ESG: TRUSTED PARTNER
CONTINUED
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
ISSUE
COMMITMENTS
STATUS
UPDATE
Colleague
Retention
Reduce our UK employee
turnover and maintain
below industry average.
UK employee turnover decreased 190 basis points
to 26.2% (2022: 28.1%), driven by a stabilisation of
previous challenging labour market conditions.
We are an industry leader in reporting this metric,
as such comparable data is not widely available.
READ MORE
pg 6.
Continue to embed our
values as the foundation
of our culture, striving to
create a great place to work.
In 2023 we launched ‘Better Behaviours, Better
Bakkavor’ and saw improved engagement scores
around understanding and demonstrating these values.
Responsible
Recruitment and
Employment
Drive awareness and action
on the issue of modern
slavery with our colleagues
and industry partners.
In 2023, we continued modern slavery awareness
training for colleagues across the business and
introduced training targets to measure the delivery.
We embedded our Remedy and Remediation policies,
completed third-party audits of employment agencies
and partnered with the Bright Future Co-op to offer
permanent employment opportunities to former
victims of modern slavery.
Local Causes and
Community
Engagement
Fundraise and support our
key Group charities through
Group donations and
colleague engagement
fundraising activities.
Bakkavor has a dedicated three-year corporate
charity partnership with GroceryAid and the Natasha
Allergy Research Foundation. In 2023, we donated
over £130,000 to these organisations.
Furthermore, each of our sites have their own charity
partnerships at a local level run by our Site Employee
Forum (“SEF”) representatives who fundraise through
activities such as fun runs, bake sales, events and
sponsorships. Bakkavor matches each site’s local
fundraising up to £2,500 a year through our matched
giving scheme. In total, the Group donated a total of
£236,000 to charities in 2023.
In November we supported The Coronation Food Project.
READ MORE
pg 28.
Our 2023 ESG report will be released on our website in April at bakkavor.com/esg.
This will provide a more detailed update on Trusted Partner and supporting ESG
performance data.
Related policies and documents
bakkavor.com/en/esg/esg-reporting
PROGRESS AGAINST OUR TARGETS AND COMMITMENTS
• Supplier Code of Conduct (UK).
• Modern Slavery Statement.
• Deforestation Statement.
• Ethical Trade and Human Rights Policy.
• Freedom of Association Policy.
• Animal Welfare Policy.
• Environment Policy.
• Group Ethical Trading and Human
Rights Policy.
• Inclusion and Diversity Policy.
Strategic priority
Achieved
Non-financial KPI
On track
Work to do
Bakkavor Group plc | Annual Report & Accounts 2023 |
45
Non-financial and sustainability
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).
READ MORE
on the data for our
Streamlined Energy and Carbon Reporting (“SECR”) on pg 60 and 61 for narrative on the principal measures taken to
improve our energy efficiency.
Reporting
requirement
Outcomes and further
information in this report
Page
reference
Relevant policies
Climate-related
Financial Disclosures
As a company listed in the UK, we
report our climate-related financial
disclosures through consistency
with the TCFD Framework and the
UK Companies Act.
50-63
ESG: TCFD
50
Requirement s414CB(2A)
Governance
82
(a)
Our strategy
20
(b), (d) (i) and (ii), (e), (f), (g)
Risk management and risk
72
(c)
Metrics and targets
59
(g), (h)
Environment
Sustainability and Innovation
Environmentally Sustainable
Sourcing
Related principal risk: climate
change and sustainability
43
42
79
Deforestation Statement
1
Supplier Code of Conduct
1
Environment Policy
1
Supplier Code of Conduct
1
Animal Welfare Policy
1
Employees
Engagement and Wellbeing
Our people
Related principal risk: health and
safety, availability, recruitment
and retention of colleagues
44
30
77, 78
Code of Conduct
2
Inclusion and Diversity Policy
1
Group Supplier Code of Conduct
1
Ethical Trade and Human Rights Policy
1
Mental Health at Work Policy
1
Human Rights
Responsible Recruitment and
Employment
Supply Chain Human Rights
Related principal risks: supply
chain, climate change and
sustainability
45
42
78, 79
Modern Slavery Statement
1
Freedom of Association Policy
1
Responsible Operations Policy
2
Ethical Trade and Human Rights Policy
1
Supplier Code of Conduct
1
Social Matters
Engagement and Wellbeing
Our people
Related principal risk: health and
safety, supply chain, availability,
recruitment and retention of
colleagues
44
30
77, 78
Code of Conduct
2
Modern Slavery Statement
1
Supplier Code of Conduct
1
Freedom of Association Policy
1
Animal Welfare Policy
1
46
| Bakkavor Group plc | Annual Report & Accounts 2023
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
WHISTLEBLOWING POLICY
The 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
enables us to effectively address any wrongdoing within
the business. The Bakkavor service, ‘Speak Up’, is
available Group-wide by Freephone or online 24 hours a
day/365 days a year and in 15 languages. Cases logged in
2023 were investigated thoroughly through local HR
contacts, General Managers and/or Business Directors,
as well as the Chief People Officer (“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 the 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.
READ MORE
pg 45.
ANTI-BRIBERY AND BUSINESS ETHICS POLICY
This policy, which also includes an embedded Gifts
and Hospitality Policy, sets out the highest standards of
business and ethical conduct expected of 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. We take a zero-tolerance approach to
bribery and corruption and are committed to acting
professionally, fairly and with integrity in all business
dealings and relationships wherever Bakkavor operates,
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.
Our Procurement team assesses our supply chain partners
for corruption and bribery risk through compliance with our
Supplier Code of Conduct. 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.
READ MORE
pg 123.
Reporting
requirement
Outcomes and further
information in this report
Page
reference
Relevant policies
Anti-bribery and
Corruption
Anti-bribery and Business Ethics
Policy
Whistleblowing Policy
Charity and Political Donations
Policy
Related principal risk: corporate
and regulatory
47
47
47
80
Anti-bribery and Business Ethics Statement
1
Anti-bribery and Business Ethics Policy
2
Whistleblowing Policy
2
Charity and Political Donations Policy
2
Supplier Code of Conduct
1
Business Model
How we create value
15
Principal Risks
Related to
Non-financial and
Sustainability Matters
Relevant principal risks include
‘Climate change and sustainability,’
‘Health and safety‘ and ‘Availability,
recruitment and retention of
colleagues.’ See: Risk
management and risks
72
Non-financial KPIs
Key performance indicators
6
1
Available at bakkavor.com and to all colleagues through the Bakkavor intranet.
2
Available to all colleagues through the Bakkavor intranet. Not published externally.
Bakkavor Group plc | Annual Report & Accounts 2023 |
47
EMPLOYEE DATA
The Group employed 18,136 employees in total. Employee numbers in the tables below are based on the average monthly
number of employees.
By location
2023
% of total
2022
2021
2020
2019
2018
United Kingdom
14,689
81%
15,567
15,863
16,356
16,942
17,004
US
925
5%
973
875
808
874
635
China
2,497
14%
2,009
2,205
2,125
2,266
2,181
Continental Europe
(Spain, Italy)
25
<1%
31
29
29
23
22
Total
18,136
18,580
18,972
19,318
20,105
19,842
By function
2023
% of total
2022
2021
2020
2019
2018
Production
14,906
82%
15,283
15,578
15,938
16,759
16,706
Management and
administration
2,345
13%
2,378
2,521
2,488
2,424
2,183
Sales and
distribution
885
5%
919
873
892
922
953
Total
18,136
18,580
18,972
19,318
20,105
19,842
Group
By gender
2023
% of total
2022
2021
2020
2019
2018
Female
8,247
45%
8,420
8,450
8,654
8,864
8,698
Male
9,889
55%
10,160
10,522
10,664
11,241
11,144
Total
18,136
18,580
18,972
19,318
20,105
19,842
UK
By gender
2023
% of total
2022
2021
2020
2019
2018
Female
6,184
42%
6,670
6,612
6,888
7,011
7,055
Male
8,505
58%
8,897
9,251
9,468
9,931
9,949
Total
14,689
15,567
15,863
16,356
16,942
17,004
International
1
By gender
2023
% of total
2022
2021
2020
2019
2018
Female
2,063
60%
1,750
1,838
1,766
1,853
1,643
Male
1,384
40%
1,263
1,271
1,196
1,310
1,195
Total
3,447
3,013
3,109
2,962
3,163
2,838
1
Includes US, mainland China, Hong Kong, Spain and Italy.
48
| Bakkavor Group plc | Annual Report & Accounts 2023
NON-FINANCIAL AND SUSTAINABILITY INFORMATION STATEMENT
CONTINUED
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
Gender pay (UK)
2023
2022
2021
2020
2019
Median gender pay gap
6.4%
9.3%
7.3%
2.1%
7.3%
Mean gender pay gap
9.3%
9.6%
9.3%
8.2%
10.7%
2023
2022
2021
2020
2019
M
F
M
F
M
F
M
F
M
F
1st quartile (lower paid)
47.1%
52.9%
40.9%
59.1%
49.3%
50.7%
58.8%
41.2%
49.5%
50.5%
2nd quartile
56.9%
43.1%
62.0%
38.0%
58.6%
41.4%
59.6%
40.4%
59.3%
40.7%
3rd quartile
65.4%
34.6%
66.1%
33.9%
63.0%
37.0%
58.1%
41.9%
62.5%
37.5%
4th quartile (highest paid)
67.8%
32.2%
67.8%
32.3%
67.4%
32.6%
67.6%
32.4%
67.5%
32.5%
Median gender bonus gap
18.2%
12.1%
15.2%
14.5%
14.9%
Mean gender bonus gap
31.9%
20.9.%
17.0%
28.1%
13.6%
Proportion of males and females
receiving a bonus
9.2%
8.0%
9.3%
7.6%
9.9%
7.8%
9.3%
7.8%
2.4%
2.0%
Senior leadership by gender, 2023
Group Board
Senior
Management
1
Senior Executive
Team
Senior
Leadership
Number
%
Number
%
Number
%
Number
%
Female
3
27%
5
33%
2
33%
11
24%
Male
8
73%
10
67%
4
67%
35
76%
Total
11
15
6
46
Senior leadership by ethnicity
3
, 2023
Group Board
Senior
Management
1
Senior Executive
Team
Senior
Leadership
Number
%
Number
%
Number
%
Number
%
Of white European heritage
10
91%
14
93%
6
100%
38
83%
Of Black, Asian or minority ethnic heritage
1
9%
1
7%
0
0%
8
17%
Total
11
15
6
46
1
Refers to the definition within the Companies Act 2006 s414C (8)-(10). Data is for financial year.
Bakkavor Group plc | Annual Report & Accounts 2023 |
49
ESG: TCFD
Bakkavor and
climate change
EXECUTIVE SUMMARY
Bakkavor recognises the climate
change emergency as the single
greatest challenge facing our world.
As such, it also has the biggest
potential impact on our business.
We have a responsibility to not just
manage our direct impact by reducing
our carbon emissions, but also
support a wider transition to Net Zero.
This will require collaboration and
continuous improvement in measuring
and managing our impacts. However,
we are committed to playing our part in
decarbonising our industry for greater
resilience and a healthier planet.
In 2021, we committed to reaching Net
Zero in our Group operations by 2040.
Since then, we have prepared our
business by developing our delivery
roadmap and embedding Net Zero into
our governance structures. In 2023 we
have further built on our ambitions by
Report against the recommendations of the Task Force on Climate-related
Financial Disclosures (“TCFD”).
submitting Net Zero aligned targets
for all scopes to the Science Based
Targets initiative (“SBTi”).
READ MORE
pg 59.
This means that we have now expanded
on our commitment to reach Net Zero
greenhouse gas emissions across the
full value chain by 2050.
As a Group, Bakkavor continues to
see progress towards our goal, as we
have reduced our net Scope 1 and 2
carbon emissions by 23.2% since our
baseline year of 2021 and Scope 3
emissions have reduced by 12.6% in
the same timeframe.
Scope 3 emissions are a significant
focus area for us as they comprise
89.3% of our overall footprint. In 2023
we have taken steps to broaden our
understanding of these indirect
emissions by extending measurement
to our US and China businesses.
Consistency with the TCFD recommendations
This section comprises our response to the
TCFD recommendations and how we comply
with the Financial Conduct Authority’s (“FCA”)
Listing Rule 9.8.6R (8). The disclosures
contained within the report are fully consistent
with these recommendations.
In preparation of the report, Bakkavor
considered the supplemental guidance for
non-financial groups and specifically the
Agriculture, Food, and Forest products
group. This is reflected in our approach to
scenario analysis, use of historical trend data
for emissions, our consideration of physical
risk exposure and use of relevant metrics
such as recyclability of packaging. We also
considered the guidance on metrics, targets
and transition plans in developing
appropriate metrics and targets for each of
our stated climate risks and opportunities.
Area
Recommended disclosures
Page
Governance
a.
Board oversight of climate risks
and opportunities
51
b.
Management’s role in assessing
and managing climate risks and
opportunities
51
Strategy
a.
Identified climate-related risks
and opportunities
52-55
b.
Impact of climate risks and
opportunities on the business,
strategy and planning.
56-57
c.
Climate-related scenario analysis
56-57
Risk
Management
a.
Process for identifying climate-
related risks
58
b.
Managing climate-related risks
52-55
c.
Integrating climate-related risks
into risk management.
57
Metrics and
Targets
a.
Metrics used to assess and manage
climate-related risk and opportunities
52-55
b.
Scope 1, 2 and 3 emissions
61-63
c.
Climate-related targets
59
Whilst our climate risk assessment,
detailed below, identifies our overall
exposure to be low as a result of our
mitigation activities, ‘Climate and Net
Zero’ is a strategic priority within our
Trusted Partner ESG strategy.
READ MORE
pg 38.
In addition, as climate change
impacts on other sustainability
topics, and recognising the
importance of our climate strategy
in mitigating future material impacts,
our risk management framework
identifies ‘Climate change and
sustainability’ as a principal risk.
READ MORE
pg 79.
50
| Bakkavor Group plc | Annual Report & Accounts 2023
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
•
Dedicated Board Committee for ESG matters,
meeting three times a year, with ownership of
managing climate change risks and opportunities,
including our Net Zero commitment.
•
Debates climate issues and provides guidance to the
ESG Executive Committee and recommendations to
the Group Board.
In 2023:
met three times. Received in-year performance
updates including quarterly carbon emissions data.
READ MORE
pg 111.
Reviewed and approved proposed science-based
targets for submission to the SBTi.
Chair:
Umran Beba, Independent Non-executive Director
•
Oversees climate-related issues and performance against emissions targets.
•
Receives updates from the ESG function on performance and climate-related risks.
•
Oversees direct strategic implementation of, and capital allocation for, energy efficiency and low-carbon projects.
Considers major plans of action, annual budgets, business plans and overseeing major capital expenditures,
acquisitions, and divestitures.
In 2023:
twice-yearly agenda included climate and ESG matters with updates on developing climate targets, and
quarterly carbon emissions progress by region. Approved proposed science-based Net Zero targets.
Sponsor:
Ben Waldron, CFO and Asia CEO
•
Accountable for considering the impact of climate-
related issues on the long-term strategy of the Group,
meeting eight times a year. Forms part of the Board
agenda as and when required.
•
Oversees progress of Net Zero commitment.
•
Reviews Group policies and commitments, includes
our Net Zero target, KPIs, progress and approach.
In 2023:
the Group Board received regular updates from
the ESG Committee on the execution of the Trusted Partner
ESG strategy and performance against non-financial KPIs,
including quarterly carbon emission modelling. This was
via the designated Non-executive Director for ESG matters
and the Group Board ESG Sponsor. Received a dedicated
training session from external advisers, focusing on
developing ESG regulation, including climate disclosures.
Approved proposed science-based targets for submission
to the SBTi, as well as remuneration incentives linked to
UK food waste and carbon emissions.
READ MORE:
Board training pg 105.
Incentives pg 130.
ESG Sponsor:
Ben Waldron, CFO and Asia CEO
GROUP BOARD
SENIOR EXECUTIVE TEAM
ESG COMMITTEE
Our governance of climate-related issues
•
Reviews principal risk ‘Climate change and sustainability’
as part of the Group’s risk management framework
as well as reporting under TCFD, meeting quarterly.
•
Ensures climate-related risks are considered in the
Group’s viability assessment and impairment reviews.
•
Ensures financial reporting disclosures of these risks
are fair and balanced, and considers broader impact
across assets, liabilities and future profitability.
In 2023:
met four times, of which one agenda featured
climate and ESG.
READ MORE
pg 116.
Chair:
Jane Lodge, Independent Non-executive Director
AUDIT AND RISK COMMITTEE
•
Reviews performance on climate and Net Zero related matters.
•
Provides overall direction of the Group’s Trusted Partner ESG strategy.
•
Identifies resources required to meet Net Zero commitment.
•
Identifies climate-related issues through risk assessments as required.
•
Advises Senior Executive Team on climate considerations of major strategic plans, major capital expenditures,
acquisitions, and divestitures.
In 2023:
met monthly and as required. Convened twice-yearly regional ESG meetings with UK Operations, US Senior
Leadership and the China ESG Committee.
Lead:
Lee Miley, UK Finance Director
ESG FUNCTION
Bakkavor Group plc | Annual Report & Accounts 2023 |
51
Impact
1
Negligible
2
Minor
3
Moderate
4
Major
5
Catastrophic
Likelihood
1
Rare
2
Unlikely
3
Possible
4
Likely
5
Almost certain
Costs of implementing low-emissions
technology
Scenarios
Likelihood
Impact
‘Well below’ 2°c
4
2
‘Hothouse world’
4
2
Risk update vs 2022
No change.
Potential impact
Additional operational costs to deliver our Net Zero
transition plan through investments in lower-emission
technologies in our manufacturing sites.
Associated opportunity
Utility savings from increased resource efficiency.
Risk update and mitigations
We developed and established workstreams to reduce our
carbon emissions across our operational footprint. These
plans are medium-term and regional in nature due to the
differing emissions profiles of our Group’s businesses.
They include:
•
Decarbonisation of UK heat and fuel.
•
Transitioning refrigeration to lower-carbon alternatives
(UK, US).
•
Minimising emissions from refrigeration systems
(all markets) and where some alternatives are not
possible (China).
•
Expanding renewable electricity in the US and China.
Risk reviewed and managed by:
ESG function.
Related metrics and targets
•
Reduce Scope 1 and 2 emissions by 42% by 2030 from a 2021
base year and Scope 3 emissions from purchased goods and
services also by 42% baseline within the same timeframe.
•
Net Zero operational (Scopes 1 and 2) emissions, Group-wide
by 2040.
•
Net Zero across the full value chain by 2050.
Progress
: pg 61.
Non-financial KPI:
Group net carbon emissions.
Link to our strategy
Risk type
Technology
Market
Policy and legal
Physical
Time horizon
(years):
UK: drive returns by leveraging our UK
number one 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 people,
customers, suppliers and communities
Link to our strategy
READ MORE
pg 20.
ESG: TCFD
CONTINUED
Strategy:
climate
risks, opportunities
and strategic impact
1–5
(short-term)
5–10
(medium-term)
10–50
(long-term)
52
| Bakkavor Group plc | Annual Report & Accounts 2023
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
Increased cost of raw materials
Changing consumer preferences
Scenarios
Likelihood
Impact
‘Well below’ 2°c
4
2
‘Hothouse world’
4
3
Risk update vs 2022
No change.
Potential impact
Increased spend on raw materials due to price fluctuations
and instability caused by transition and physical climate risks.
Associated opportunity
Opportunity for ongoing rebase of costings as our business
evolves our product offering to reflect trends and seasonality.
Risk update and mitigations
Our diverse product portfolio means we source an extensive
range of raw materials and packaging items from a large
number of suppliers across a global supply chain. Our
Procurement function includes product- and supplier-
specific category managers and in-bound supply chain
experts, based in the UK, Continental Europe and China.
As part of our ongoing strategy, sourcing plans are
developed for all our raw materials and packaging
requirements to take account of many different dynamics,
building in risk management to underpin the delivery of
operational and customer needs.
In 2023, the industry faced supply chain disruption as a
result of extreme weather events. Working with our
customers, we mitigated the impacts through alternative
sourcing plans and geographies. We continue to engage
with our supply base on environmental sustainability.
Risk reviewed and managed by:
Responsible Sourcing
Governance group.
Related metrics and targets
As part of our submission to the SBTi, we have made the
below commitments related to Forest, Land and Agriculture
(“FLAG”) emissions:
•
Reduce absolute Scope 1 and 3 FLAG GHG emissions 30.3%
by 2030 from a 2021 baseline.
•
Reduce Scope 1 and 3 FLAG GHG emissions 72% by 2050.
•
No deforestation across our primary deforestation-linked
commodities by the end of 2025.
Progress
: pg 61 and 38.
Link to our strategy
Scenarios
Likelihood
Impact
‘Well below’ 2°c
5
2
‘Hothouse world’
5
2
Risk update vs 2022
No change.
Potential impact
Decreased revenues due to failure to shift product portfolio to
support consumer demand for lower climate impact products.
Additional costs for potential carbon or eco labelling.
Associated opportunity
Increased market share, due to ability to respond to changing
consumer demands and provide lower-carbon products.
Risk update and mitigations
Bakkavor’s Packaging and Development teams work to
integrate sustainability considerations into the product
development process and work towards time-bound ESG
packaging targets noted below.
Through engagement with the Institute for Grocery
Distribution (“IGD”) and other forums, we actively
participate in industry discussions around eco labelling and
lifecycle analysis, enabling us to shape and adopt practices
as they evolve. 2023 has seen increased activity in this
space and Bakkavor is well-placed to respond as a result.
Bakkavor market research is regularly presented at
Board-level and supports strategic decision-making in
new and existing product development. For example,
increasing vegetable content in, and supporting demand
for, more sustainable packaging through reducing and
removing plastics where possible and using more
recycled/recyclable materials.
Risk reviewed and managed by:
ESG function and
Packaging teams.
Related metrics and targets
•
% of products that are vegetarian (73%, up from 52% in 2022)
and plant-based (15%, down from 19% in 2022).
•
Support progress towards achieving the UK Plastics
Pact’s 2025 industry goals: eliminating unnecessary
plastic packaging, 100% reusable or recyclable plastic
packaging and at least 30% average recycled content
in plastic packaging.
Progress
: pg 43.
Link to our strategy
1–5
(short-term)
5–10
(medium-term)
10–50
(long-term)
1–5
(short-term)
5–10
(medium-term)
10–50
(long-term)
Time horizon
(years):
Time horizon
(years):
Bakkavor Group plc | Annual Report & Accounts 2023 |
53
Scenarios
Likelihood
Impact
‘Well below’ 2°c
4
3
‘Hothouse world’
4
3
Risk update vs 2022
No change.
Potential impact
Increased operating costs due to forecasted carbon
pricing, introduced through possible mechanisms
including emissions trading schemes, tax or carbon
border adjustment mechanism.
Associated opportunity
Opportunity to reduce emissions to meet our targets
where investment is financially unviable or technology
advancements cannot deliver required emission reductions.
Risk update and mitigations
Bakkavor mitigates this risk by delivering our climate and
Net Zero targets through our operational workstreams.
Risk reviewed and managed by:
Finance and ESG functions.
Related metrics and targets
•
Net Zero, Group-wide for operational emissions by 2040.
•
Reduce absolute Scope 1 and 2 GHG emissions by 42%
by 2030 from a 2021 baseline.
•
Net Zero across the full value chain by 2050.
Progress
: pg 61.
Non-financial KPI:
Group net carbon emissions.
Link to our strategy
ESG: TCFD
CONTINUED
Impact
1
Negligible
2
Minor
3
Moderate
4
Major
5
Catastrophic
Likelihood
1
Rare
2
Unlikely
3
Possible
4
Likely
5
Almost certain
Risk type
Technology
Market
Policy and legal
Physical
Link to our strategy
1–5
(short-term)
5–10
(medium-term)
10–50
(long-term)
UK: drive returns by leveraging our UK
number one 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 people,
customers, suppliers and communities
Time horizon
(years):
Pricing of GHG emissions
54
| Bakkavor Group plc | Annual Report & Accounts 2023
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
Scenarios
Likelihood
Impact
‘Well below’ 2°c
4
2
‘Hothouse world’
4
3
Risk update vs 2022
No change.
Potential impact
Increased energy consumption due to higher cooling
demand, increased stress on water resources, reduced
productivity and increased logistics disruption (chronic
climate impacts).
Site damages, disruption, increased maintenance, repair
and insurance costs from acute events such as floods.
Associated opportunity
Opportunities for innovation and upgrades in our sites
through our response to risk mitigation.
Risk update and mitigations
Successful delivery of our Net Zero aligned climate strategy
supports industry-wide decarbonisation to mitigate the
physical impacts of climate change. This includes prioritising
projects in the medium-term to: maximise utility efficiency;
reduce absolute emissions; and support site-specific
adaptations to heat stress and drought. We also work to
optimise water intensity per tonne of product and monitor
its use through site-level environmental trackers.
Currently, two of our China sites, Haimen and Guyanzhou,
are deemed high-risk for river flooding although we have
not seen any impacts to date. If experience worsens due to
rising sea levels and/or increased frequency/severity of
weather events, we will consider investment in flood walls.
Future capital projects and acquisitions take account of
flood risk.
Risk reviewed and managed by:
Property Insurance team.
Related metrics and targets
•
Net Zero, Group-wide for operational emissions by 2040.
•
Reduce absolute Scope 1 and 2 GHG emissions by 42% by
2030 from a 2021 baseline.
Progress
: pg 61.
Non-financial KPI:
Group net carbon emissions.
Link to our strategy
Scenarios
Likelihood
Impact
‘Well below’ 2°c
4
3
‘Hothouse world’
4
4
Risk update vs 2022
Impact updated following a deep-dive assessment on
specific materials, which can be found on pg 57.
Potential impact
Disruption and higher costs due to decline in agricultural
yield, increased heat stress and drought (chronic impacts).
Bottlenecks, shortages and sourcing disruption from
increased exposure to acute climate impacts such as floods
and storm events.
Associated opportunity
Supply chain engagement to mitigate risks could increase
resilience and strengthen supplier relationships, increasing
competitive advantage.
Risk update and mitigations
Bakkavor’s Responsible Sourcing strategy is designed to
safeguard supply chain resilience by sourcing raw materials
as sustainably as possible.
Our Supplier Code of Conduct and environmental questionnaire
ensure that suppliers manage environmental issues in line
with our sourcing standards for key raw materials.
Our Bakkavor Supplier Compliance Manager (“BSCM”) is a
proprietary risk assessment system based on product(s),
location, capabilities and exposures to environmental risks
as determined by global intelligence sources. Through this,
we work with suppliers to reduce their risk.
Suppliers are engaged as required to ensure we have an
up-to-date understanding of our supply chain risk. In 2023
both were reissued as part of an updated assessment.
Risk reviewed and managed by:
Responsible Sourcing
Governance group.
Related metrics and targets
•
No deforestation across our primary deforestation-linked
commodities by the end of 2025.
Supplier risk is assessed by responses to our Code of
Conduct questionnaires as tracked through BSCM.
Progress
: pg 38.
Link to our strategy
1–5
(short-term)
5–10
(medium-term)
10–50
(long-term)
1–5
(short-term)
5–10
(medium-term)
10–50
(long-term)
Time horizon
(years):
Time horizon
(years):
Actual physical risks to our operations
Actual physical risks to our supply chain
Bakkavor Group plc | Annual Report & Accounts 2023 |
55
Our strategy:
to deliver profitable
and sustainable
growth
ESG: TCFD
CONTINUED
Overall, based on the risk
analysis performed and set out
in this section, our risk exposure
overall is deemed to be low.
A number of the risks are
interdependent, such as: ‘Cost of
implementing low emissions
technology’, ‘Pricing of GHG emissions’
and ‘Increased cost of raw materials’
with ‘Actual physical risks to our
supply chain’, and we can mitigate
some of the potential impact.
Of the above risks, ‘Pricing of GHG
emissions’ is classified as ‘moderate’
impact which the business considers
as a financially material risk. Bakkavor
defines ‘moderate’ risk as impacting
5-10% of operating profit. This impacts
Bakkavor through increased operating
costs due to forecasted carbon pricing.
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. We are
gradually aligning these costs into
our financial planning as part of
refining our climate transition plan.
Strategic
impact
and resilience
EXCELLENCE
TRUST
INTERNATIONAL
UK
Drive returns by leveraging our UK number
one market position
•
Refrigeration: replace existing refrigeration systems with
new energy-efficient solutions. Currently more than £50m
has been allocated to upgrading our refrigeration facilities
to low- or zero-carbon alternatives between 2023 – 2030.
•
Asset replacement: implement energy-efficient solutions
as part of the normal end-of-life asset replacement cycle.
•
Incorporate climate risk understanding into raw material
sourcing plans, supporting supply chain resilience.
Accelerate profitable growth in the US
and China
•
Green growth: ensure any potential new production sites
are built with a low-carbon footprint, e.g. refrigeration
systems, with clear renewables-focused energy sourcing.
•
Asset replacement: implement energy-efficient solutions
as part of the normal end-of-life asset replacement cycle.
•
Solar panels installed at our Beijing site, with more sites
to follow.
Deliver superior performance
through operational excellence
•
Efficiency: prioritise efficiency initiatives that combine
monetary saving with lower emissions.
•
Use our operational excellence model to deliver UK
food waste reductions.
READ MORE
pg 43.
Be a Trusted Partner for our
people, customers, suppliers
and communities
•
Deliver against our science-based targets in the near-term
(2030) and achieve Net Zero operational emissions by 2040
and across the value chain by 2050.
•
Collaborate with our customers and suppliers in enabling
the climate transition in our value chains through increasing
transparency and understanding of climate impacts.
•
Assess our suppliers’ ability to manage climate and
environmental issues using our BSCM.
In 2023 we reviewed our modelling
against our latest decarbonisation
pathway and strategy. Based on this,
the estimated potential financial
impact to the Group is £5-10m p.a. by
2032, reducing to £3-5m p.a. by 2050.
GHG emissions pricing is taken into
account in the impairment reviews.
READ MORE
pg 173.
Our business continues to incorporate
climate risks into our overall strategy
on an ongoing basis, such as through
some of the examples shown below.
56
| Bakkavor Group plc | Annual Report & Accounts 2023
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
Strategic supply chain
resilience
In 2023 Bakkavor extended the
integration of climate risk within our
business by conducting a deep-dive
on physical climate risks in our
supply chain to assess its resilience
over a long-term time horizon. This
focused on raw materials that are
strategic to our business and used
the same climate scenarios as our
overall climate risk assessment
‘Well below’ 2°c
‘Hothouse world’
Likelihood
Impact
Likelihood
Impact
Dairy
3
3
5
4
Ingredients
1
4
4
5
4
Produce
4
4
5
4
Protein
3
3
5
4
Packaging
1
1
3
4
1
Includes a range of products such as oils.
Risk management:
assessing and managing
our exposure to climate risks
The output of the analysis conducted
on our operations and supply chain
indicates our overall climate risk
exposure is deemed to be low, due to
existing mitigation factors such as:
•
Risk-sharing mechanisms for raw
material price fluctuations and
medium-term energy efficiency.
•
Successful delivery of our climate
transition plan and objective of
reducing emissions as far as possible.
We have integrated ESG issues into our
Group risk management framework
through the principal risk ‘Climate
change and sustainability’, which
incorporates climate and delivery
of our ESG strategy as a whole. This
requires principal risk owners to
consider relevant environmental, social
or governance issues when conducting
reviews and assessments of each risk.
Whilst a number of transition risks
(e.g. increased raw material costs and
changing consumer preferences) are
deemed highly likely, we are well-
placed to mitigate the impacts on the
business, and their financial impact
is considered low to moderate, as
described above. We have also
identified opportunities regarding
several climate risks; for example, the
potential for increasing market share
through aligning our product portfolio
to support market trends for more
climate-friendly diets. In 2023, we saw
vegetarian products make up 73% of
our portfolio (up from 52% in 2022).
Despite our current risk exposure
being deemed low, Bakkavor’s risk
management framework identifies
‘Climate change and sustainability’
as a principal risk.
READ MORE
pg 79.
The Group recognises the impetus
to respond to and continue a robust
assessment of Bakkavor’s climate risk
exposure as well as climate change’s
impacts on other sustainability topics.
Furthermore, climate and Net Zero are
a strategic priority within our Trusted
Partner ESG strategy, which uses a
double materiality lens in prioritisation.
As part of our management of climate
risks, in 2023 Bakkavor began to
review its incentives plan to align with
ESG objectives. As of 2024, carbon
emissions is a metric within our
Long-Term Incentive Plan (“LTIP”) as
this incentive applies to management-
level colleagues who have the most
relevance in influencing the metric.
READ MORE
pg 131.
(described below). It considered the
likelihood of supply chain disruption
as well as the impact on pricing and/
or availability of the raw material in
each given scenario.
During the year supply chain disruption
was experienced industry-wide, as a
result of extreme weather events and
adverse growing conditions which
impacted the availability and quality
of raw materials in the agriculture/
horticulture sector. Bakkavor worked
closely with suppliers and customers
to minimise impacts, leveraging our
sourcing plans that include a spread
of supply options across a number of
different geographic growing locations.
Bakkavor Group plc | Annual Report & Accounts 2023 |
57
Assumptions and parameters used in scenario analysis
to identify climate-related risks
Bakkavor has undertaken a scenario
analysis and climate risk assessment
of our operations and supply chain.
These have identified the risks described
on the previous pages.
This involved:
1. Building scenarios against which the business
could be stress-tested, following guidance in
the TCFD Guidance on Scenario Analysis for
Non-Financial Companies.
2. Running catastrophe and climate modelling
for physical risks.
3. Identifying and evaluating transition risks
and quantifying risks where possible.
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.
Assumptions take into account the implications
of transitioning to a low-carbon economy on
environmental, social, economic, political and
technological dimensions. Sources informing the
scenarios included projections used in Shared
Socioeconomic Pathways (“SSP”), the IEA
(Sustainable Development), IPCC (RCP 2.6) and
Network for Greening the Financial System
(“NGFS”) Below 2°c Orderly Scenario.
The physical risk assessment looked at the
acute and chronic impacts of climate change.
For example: damage to our sites or sourcing
locations caused by increased frequency and/or
severity of extreme weather events (acute
risks); increased heat; and/or drought stress
(chronic risks). Sources included the
Representative Concentration Pathways (“RCP”)
as defined by the Intergovernmental Panel
(“IPCC”) on Climate Change’s 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 likelihood and impacts of
acute physical risks increase with the ‘hothouse
world’ scenario of RCP 8.5 (4°c) as well as over
time (2050 and beyond). Chronic physical risks
emerge under the ‘hothouse world’ scenario
from 2050. For both types, risks may be more
pronounced in some regions than others.
To quantify risks, we have used Bakkavor’s risk
management framework rating criteria. Each
risk was assessed on its likelihood and impact,
and the potential financial impact classified
based on these criteria. To further align, we
interpreted the timelines used in the RCPs to
our own risk framework. Other metrics, such
as carbon price forecasts, were used where
relevant. This exercise was first conducted in
2021 and refreshed in 2023.
The outcomes of the scenario analysis have been
used to identify the previous pages’ climate-
related risks and opportunities and evaluate our
business’s strategic resilience, as described in
the Strategy section above. The process and
outcomes were reviewed by both the Group
Board and Senior Executive Team (“SET”).
ESG: TCFD
CONTINUED
58
| Bakkavor Group plc | Annual Report & Accounts 2023
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
SETTING SCIENCE-BASED
TARGETS ALIGNED TO NET ZERO
Since 2018 we have targeted year-
on-year improvements in carbon
reduction. In early 2021, we
formalised our commitment to
Net Zero carbon emissions across
the Group’s operations by 2040.
Recognising the need for longer-term
planning to meet our commitment, in
2022 we began to develop our climate
transition plan by assessing our
regional decarbonisation priorities.
In 2023 Bakkavor submitted Net Zero
aligned targets for all scopes to the
Science Based Targets initiative
(“SBTi”). This means that we have
now expanded on our commitment to
reach Net Zero operational emissions
by 2040. These targets will be
validated by the SBTi during 2024
to ensure that we are building our
roadmap to Net Zero in line with
current best practice, including the
Paris Climate Agreement’s aim of
limiting global warming to 1.5°c.
As a food manufacturer, our SBTi
submission includes targets for
emissions from Forest, Land and
Agriculture (“FLAG”). For Bakkavor,
these are almost entirely within our
supply chain (Scope 3), with a very
small proportion originating from
our salad farm in China (Scope 1).
The targets that we have submitted
to the SBTi are as follows:
•
Bakkavor commits to reach Net
Zero greenhouse gas emissions
across the full value chain by 2050.
Near-term energy and industrial
•
Bakkavor commits to reduce
absolute Scope 1 and 2 GHG
emissions by 42% by 2030 from a
2021 baseline year
1
and Scope 3
emissions from purchased goods
and services by 42% within the
same timeframe.
Long-term energy and industrial
•
Bakkavor also commits to reduce
absolute Scope 1, 2 and 3 GHG
emissions by 90% by 2050 (from
a 2021 base year).
Forest, Land and Agriculture
•
Bakkavor commits to reduce
absolute Scope 1 and 3 FLAG GHG
emissions by 30.3% by 2030 (from
a 2021 base year)
2
.
•
Bakkavor also commits to reduce
Scope 1 and 3 FLAG GHG emissions
by 72% by 2050
2
(from a 2021
base year).
•
Finally, Bakkavor commits to no
deforestation across its primary
deforestation-linked commodities
by the end of 2025.
1
The target boundary includes land-related emissions and removals from bioenergy feedstocks.
2
The target includes FLAG emissions and removals.
As a Group, Bakkavor has seen three
consecutive years of Scope 1 and 2
net emissions decreases and a
reduction of 23.2% since our baseline
year of 2021. This has been driven by
a focus on reducing emissions from
refrigeration (“F”) gases across all
markets. This minimised leakages
and involved replacing with lower-
carbon alternatives such as ammonia
systems, where possible. The closure
of two factories in the UK has
reduced UK gross emissions by
approximately 4% year-on-year.
A significant focus area for us is our
Scope 3 emissions, which comprise
89.3% of our overall footprint. In 2023
we took steps to broaden our
understanding of these indirect
emissions by extending measurement
to our US and China businesses
as well as making direct reductions
through interventions such as
reducing our packaging use.
Bakkavor will review these targets
and update as necessary in line with
SBTi recommendations and every
five years as a minimum.
Our
metrics and targets
CLIMATE TARGETS
2030
2040
2050
42% REDUCTION
ACROSS ALL SCOPES
1
NET ZERO IN OUR
OWN OPERATIONS
NET ZERO ACROSS
THE VALUE CHAIN
(ALL SCOPES)
1
Against a 2021 baseline. The 2030 Scope 3 target refers to emissions from purchased goods and services,
which represent 85% of our base year Scope 3 emissions.
Bakkavor Group plc | Annual Report & Accounts 2023 |
59
ESG: TCFD
CONTINUED
Our carbon emissions measurement
This is our sixth year reporting carbon emissions for
the Group, which includes our three businesses: the
UK, US and China.
GHG emissions for 2023 have been measured and
reported as required under the Companies Act 2006
(Strategic Report and Directors’ Report) Regulations,
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 and instead leased to tenants as
Bakkavor does not have oversight or control of this
energy usage and emissions data. These properties
are immaterial within the context of our overall
property footprint.
The Group’s Environmental Management System is
based on ISO 14001.
Scope 1 emissions:
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 facilities.
Scope 2 emissions:
released indirectly from our
consumption of energy sources (electricity and
cooling streams).
Scope 3 emissions:
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’ and the Corporate Value
Chain (Scope 3) 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).
Bakkavor also discloses to CDP’s climate change
questionnaire. The most recent questionnaire is
based on the 2022 reporting year and received a
disclosure score of B – see: cdp.net.
The tables on pg 61 show GHG emissions and total
annual energy for both the Group and Bakkavor
Foods Limited (UK) and include the data for our
Streamlined Energy and Carbon Reporting (“SECR”).
ENERGY EFFICIENCY STATEMENT
Energy use has decreased 5.0% Group-wide
compared to 2022. This is split as a 6.8% decrease
in the UK, a 1.8% decrease in the US and an increase
of 11.6% in China as a result of a production increase
and volume recovery. The energy increase in China
is not reflected in emissions growth largely due to a
reduction in emissions from refrigerants.
Data, including an intensity ratio metric, is shown on
the following pages.
Principal energy efficiency actions
The year-on-year improvement is driven by a
combination of increased energy efficiency measures
such as refrigeration upgrades, implementation of
heat recovery systems and measures of continuous
improvements as part of our ongoing operational
efficiency engineering programme. Examples of this
programme include adding insulation, monitoring
and maintenance to avoid compressed air leaks, a
focus on reducing emissions where possible from
refrigeration (“F”) gases by avoiding leaks and
replacing the gases with lower-carbon alternatives.
All eligible UK manufacturing sites operate under
Climate Change Agreements and we employ an
Environmental Management System which includes
risk management standards, guidance and tools.
In China (8.5% of Group energy demand), we went
live with solar panels at our site in Beijing which
produced almost 624MWh of clean energy for the site.
In the US (9.2% of Group energy consumption), we
focused on energy efficiency through site audits as
well as opportunities to reduce refrigeration demand.
GREENHOUSE GAS EMISSIONS METRICS
The tables opposite show annual (1 January – 31 December) data for 2023, as well as prior years for GHG emissions
for the Group and our UK business, Bakkavor Foods Limited.
In 2023 we saw a 3.5% reduction in our gross (location-based) carbon footprint (Scope 1 and 2), and a 5.3% decrease in
our net (market-based) carbon footprint. In addition, the carbon efficiency of our business has improved as our intensity
ratio (gross emissions per £m reported revenue) reduced by 6.4% to 63.1tCO
2
e/£m reported revenue. In the UK, net
emissions reduced by 3.9% and the intensity ratio decreased 5.5% to 52.5tCO
2
e/£m reported revenue.
60
| Bakkavor Group plc | Annual Report & Accounts 2023
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
Operational (Scope 1 and 2) greenhouse gas emissions – Group
–
tCO
2
e, for the period 1 January 2023 – 31 December 2023
2023
Change
2022
2021
2020
Scope 1: emissions from combustion of fuel
and operation of facilities
UK
58,293
-2.6%
59,855
70,336
83,926
US
7,168
-14.5%
8,386
11,264
14,515
China
5,315
-41.1%
9,029
17,754
8,418
Total Scope 1 emissions
70,776
-8.4%
77,270
99,354
106,858
Scope 2: emissions from purchased electricity
and cooling
UK
38,915
-0.5%
39,121
44,012
49,396
US
5,848
-3.4%
6,052
6,495
7,583
China
23,417
8.5%
21,592
23,375
20,708
Total Scope 2 emissions (location-based)
68,180
2.1%
66,765
73,881
77,687
Green tariff
34,687
2.2%
33,928
37,544
43,007
Total Scope 2 emissions (market-based)
33,492
2.0%
32,836
36,337
34,680
Total gross emissions (location-based)
138,956
-3.5%
144,035
173,235
184,545
Total net (market-based) emissions
104,269
-5.3%
110,106
135,691
141,538
Intensity ratio (gross tCO
2
e/£m reported revenue)
63.1
-6.4%
67.3
92.6
102.9
Annual energy consumption – Group –
kWh
2023
Change
2022
2021
2020
Scope 1: energy from combustion of fuel and operation
of facilities including transport (kWh)
322,710,333
-4.8%
338,883,129
352,728,213
391,680,450
Scope 2: energy from purchased electricity and cooling
(kWh)
245,785,716
-4.6%
257,698,953 265,077,689
269,787,168
(Of which, on-site generated renewable consumption)
623,987
–
–
–
–
Total energy (kWh)
568,496,048
-5.0%
596,582,083
617,805,902
661,467,618
Greenhouse gas emissions – UK –
tCO
2
e
2023
Change
2022
2021
2020
Scope 1 emissions from combustion of fuel and
operation of facilities
58,293
-2.6%
59,855
70,336
83,926
Location-based Scope 2 emissions from purchased
electricity and cooling
38,915
-0.5%
39,121
44,012
49,396
Green tariff
34,687
2.2%
33,928
37,544
43,007
Market-based Scope 2 emissions
4,227
-18.6%
5,193
6,468
6,389
Total gross emissions (location-based)
97,208
-1.8%
98,976
114,348
133,322
Total net (market-based) emissions
62,521
-3.9%
65,048
76,804
90,315
Intensity ratio (gross tCO
2
e/£m reported revenue)
52.5
-5.5%
55.5
71.8
85.1
Annual energy consumption – UK –
kWh
2023
Change
2022
2021
2020
Total non-renewable energy consumption (kWh)
468,018,080
-6.8%
501,953,056
521,885,147 573,288,445
Total renewable energy consumption (on-site
generated), kWh)
–
–
–
–
–
Total energy consumption (kWh)
468,018,080
-6.8%
501,953,056
521,885,147 573,288,445
Totals may not reflect sum of values shown due to rounding.
Bakkavor Group plc | Annual Report & Accounts 2023 |
61
ESG: TCFD
CONTINUED
SCOPE 3 EMISSIONS
Scope 3 indirect emissions are those associated with the
operations of the business that are not under our direct
control. These can range across: the production of raw
materials; transport of goods to site; disposal of waste;
manufacturing of packaging; colleague commuting and
business travel; and downstream use and disposal of our
products by retailers and consumers. The emissions
presented have been calculated in accordance with the
GHG Protocol’s Corporate Standard and Scope 3 Standard.
We first conducted a baseline assessment of our Scope 3
footprint for our UK business in 2021. This helped to:
•
Develop a ‘hot spot’ analysis of our upstream and
downstream climate influence.
•
Inform action plans with our direct suppliers.
•
Identify priority raw materials for action.
In 2023 we extended this to map our Scope 3 footprint in
our US and China businesses since 2021, which has also
supported our setting of science-based climate targets for
Scope 3 emissions. Those shown represent relevant Scope
3 categories from energy and industry sources. Following
the initial baseline assessment other categories were
deemed not applicable or ‘de minimis’. We have calculated
Scope 3 emissions from FLAG sources and will disclose
these following the validation of our science-based targets
by the SBTi.
Overall, our Scope 3 emissions represent 89.3% of our Group
carbon footprint. The vast majority (81.7%) of our Scope 3
footprint comes from purchased goods and services. These
are predominantly raw materials and ingredients such as
dairy and meat and also plastic packaging.
This increases the importance of working with our
suppliers and customers to capture more representative
data, understand what can be done to reduce emissions,
and support these efforts.
ENABLING THE CLIMATE TRANSITION IN OUR BROADER
VALUE CHAINS
As a business, our influence on Scope 3 emissions comes
through working closely with our supply chain, which we
do through our Responsible Sourcing workstream, and a
programme of engagement to ensure compliance with our
requirements on environmental and social topics, through
our Supplier Code of Conduct.
READ MORE
pg 42.
In addition, we address emissions associated with
packaging by:
•
Reducing and removing plastics in our packaging
where possible.
•
Increasing use of recycled content.
•
Ensuring widespread recyclability.
•
Using certified sustainable sources for card-
based packaging.
Bakkavor is also influencing Scope 3 emissions associated
with deforestation and land use change in an indirect way
through our sustainable sourcing approaches for the
forest-risk raw materials we use: soy, palm oil, beef and
timber used for card packaging. For example, for soy, used
as feed for animal and dairy products, we require evidence
from suppliers that the soy used comes from an origin
with low risk of deforestation or conversion. We are also
sourcing through appropriate third-party, company or
regional schemes.
62
| Bakkavor Group plc | Annual Report & Accounts 2023
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
Greenhouse gas emissions – Scope 3 (energy and industry) –
tCO
2
e, for the period 1 January 2023 – 31 December 2023
Bakkavor Group
Emissions (tCO
2
e)
Scope 3 category
2023
Change
2022
2021
1. Purchased goods and services
707,662
-19.0%
873,932
840,486
2. Capital goods
14,078
1.3%
13,896
18,025
3. Other fuel-and-energy-related activities
31,167
-3.0%
32,136
35,764
4. Upstream transportation and distribution
5,867
-1.3%
5,945
4,682
5. Waste generated in operations
4,922
-4.9%
5,177
5,240
6. Business travel
733
175.8%
266
160
7. Employee commuting
22,449
0.5%
22,329
22,240
9. Downstream transportation and distribution
7,801
-2.2%
7,980
6,200
12. End-of-life treatment of sold products
71,303
10.1%
64,748
57,682
Total Scope 3 emissions
865,981
-15.6%
1,026,409
990,481
As a proportion of total net footprint
89.3%
-1.2%
90.3%
88.0%
Bakkavor Group plc | Annual Report & Accounts 2023 |
63
Building strong relationships
with our
stakeholders
We have identified five relevant stakeholder groups:
Why we engage
What matters most to them
Stakeholders
People are at the heart of our
business, with c.18,000 diverse
and talented colleagues belonging
to over 100 nationalities.
We have strategic relationships
across our grocery retail, online,
direct-to-consumer, brand and
foodservice customers.
•
Understand what matters to them and
incorporate their views into our Group
Board decision-making.
•
Make Bakkavor a great place to work
where our colleagues feel supported
and fulfilled.
•
Build long-term strategic relationships
through ongoing engagement and
investment.
•
Understand our customers’ and
consumers’ needs so we can respond
to new trends through innovation.
•
Support our mutual business models
by a fair and transparent approach to
sharing information.
•
Support our customers’ sustainability
goals and ambitions as part of our
Trusted Partner ESG strategy.
•
A safe and inclusive workplace.
•
A voice in the Group’s decision-making.
•
The opportunity to realise their potential.
•
Support for their needs in the face of cost
of living and labour market challenges.
•
Opportunities to leverage insight to
develop innovative and great-tasting
products.
•
High-quality products that meet required
technical and food safety standards at
high service levels.
•
Minimised disruption from industry-wide
challenges across supply chain, inflation
and labour.
•
A collaborative approach to deliver
progress on sustainability issues.
OUR COLLEAGUES
OUR CUSTOMERS
SECTION 172(1) STATEMENT
The Group Board has a duty under
Section 172 of the Companies Act
2006 (“Section 172(1)”) to promote
the success of Bakkavor. In doing so,
its decisions must have regard for a
number of factors:
•
The likely consequences of any decision in the long-term.
•
The interests of our colleagues, suppliers, customers and investors.
•
The impact of our operations on our community and the environment.
•
The desirability to maintain our reputation for having the highest
standards of business conduct.
•
The need to act fairly between members of the Company.
A strong understanding of our stakeholders is crucial to our value creation, long-term growth and success.
We are committed to continually engaging with our stakeholders, and incorporating their views and interests
when making key business decisions.
We understand that there can be different and sometimes conflicting views across our key stakeholder groups.
We therefore seek to balance competing interests and respond in a way that maximises value for all.
64
| Bakkavor Group plc | Annual Report & Accounts 2023
STAKEHOLDER ENGAGEMENT
STEPS TAKEN
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
•
React to change and embrace new ways of
working through improved communications.
•
Enhanced leadership training planned for 2024.
•
Invest in our talent pipeline through award-
winning apprenticeship and graduate schemes.
•
Continue to embed our refreshed values.
•
Run a Female Mentoring programme and
Female Networking Group.
•
Celebrate success via our ‘Proud to Be’ Awards.
•
Review our EES for opportunities to improve.
•
Implement pay reviews and wider engagement
activities to support retention and recruitment.
•
Offer Bakkavor-branded discounted food to all
UK employees.
•
Launched a new Wellbeing strategy.
•
Standardise food safety and health and safety
best practices and risk assessments.
How the Group Board engages
How the Company engages
How we are responding
•
CEO regularly engages with key
customers and reports back to Group
Board on outcomes to maintain
relationships, connect with the broader
supply chain and share expertise.
•
Reviews updates on supply chain risk
management, any potential impact on
service levels, and opportunities to
collaborate with customers to mitigate
the impact.
•
Reviews updates on inflation impact and
outlook. Considers levers to offset pressure,
including pass-through mechanisms,
pricing discussions, productivity
improvements and cost control.
•
Considers UK market insight updates to
understand consumers’ needs, and how
this is leveraged to inform category plans
and new product pipelines.
•
Reviews market updates on latest
developments and growth opportunities
in US and China.
•
Has daily engagement across
Development, Marketing, Commercial
and Technical functional teams.
•
Liaises closely with CEO and Customer
Directors, with outcomes reported
back to Group Board.
•
Rolls out online surveys, focus groups
and research.
•
Receives announced and unannounced
customer audits.
•
Works collaboratively with customers
on shared ESG priorities.
•
Continue to develop new products to meet
consumer demands; focus on value
optimisation and efficiency initiatives.
•
Maintain high service levels despite supply
chain disruption and labour pressures.
•
Remain a high-quality manufacturer with
strong food safety and health and safety.
•
Invest in automation and improvements in
factory performance.
•
Support customers on key sustainability
commitments.
•
Continue offering support through customer-
dedicated teams.
•
Continue to implement pass-through
mechanisms and secure price increases
across our cost base.
•
Consolidate UK commercial and development
structures to maintain operational efficiency, a
customer-centric approach and category focus.
BOARD ACTIONS
Firmly embedding Section 172(1) through the Group Board’s decision-making process:
Section 172(1) factors
considered in Group Board
discussion on strategy,
including how they underpin
long-term value creation.
Group’s culture fully
considers the potential
impacts of decisions.
Group Board receives
updates on a timely basis
and assurance where
appropriate.
Group Board ensures
Section 172(1) factors are
taken into consideration in
its decision-making.
Group Board
updated and informed
on the outcomes
of its decisions.
Actions taken as a
result of engagement
and dialogue with
stakeholders.
Group Board papers
include table of Section
172(1) factors and
relevant information.
Stakeholder engagement
activities are recorded, and
detail included in Board
papers where applicable.
Decision-making
Strategic discussions
Information gathering
READ MORE
pg 95.
•
Discusses Company purpose, culture,
talent and people developments.
•
Designates a workforce engagement
Non-executive Director.
•
Holds sessions with the Site Employee
Forum (“SEF”) and Group Employee
Forum (“GEF”); relays colleague
feedback, views and outcomes.
•
Understands colleague engagement by
reviewing our Employee Engagement
Survey (“EES”) results, and takes action
to address employee feedback.
•
Reviews food safety and health and safety
data and updates, to ensure protecting
colleagues remains a priority.
•
Reviews wellbeing and I&D support
offered to colleagues.
•
Participates in regular SEF and
GEF, Wellbeing Committee and
the I&D Forum.
•
Designated workforce engagement
Non-executive Director interacts
with colleagues.
•
Employs a Group-wide EES.
•
Implements our whistleblowing hotline
‘Speak Up’ initiative.
•
Updates via internal communications,
intranet, a monthly UK Bakkavor Brief,
and colleague magazine.
•
Maintains direct online messaging to UK
factory workers through a digital portal.
•
CEO quarterly business updates for
senior leaders, providing opportunities
to connect in-person and virtually.
Bakkavor Group plc | Annual Report & Accounts 2023 |
65
Why we engage
What matters most to them
Stakeholders
Across our well-established
global network of c.1,300
suppliers, we collaborate closely
on supply chain management as
well as responsible sourcing.
Regular shareholder
engagement is important; to
capture feedback, respond and
promote their interests, and
ultimately deliver value.
•
Source breadth of high-quality raw
materials that meet our standards of
food safety and technical integrity, and
support innovation.
•
Maintain continuity of supply of raw
materials to help manage labour availability.
•
Ensure the integrity of our supply chain
through our Responsible Sourcing strategy.
•
Share our purpose and strategy and
demonstrate how we create value.
•
Establish an effective channel of
communication with existing and potential
shareholders to understand their priorities.
•
Clarity of forecast requirements to enable
delivery on time and in full.
•
Opportunities to improve, innovate and
grow their business.
•
A partnership underpinned by trust and
transparency.
•
Fair and open discussions on movements
in input costs and pricing.
•
A strong strategy and business model.
•
Long-term sustainable profitable growth
to enhance returns.
•
Understanding business opportunities
and challenges.
•
Fair, balanced and understandable
reporting.
•
An understanding of the business’s
exposure and plans in relation to ESG
issues, including climate risks.
We operate from 44 sites across
the UK, US and China and
recognise that we need to act
responsibly and be a Trusted
Partner to our local communities.
•
Be a Trusted Partner by upholding
our high standards and capability to
operate responsibly.
•
Support local economic development by
creating jobs and supporting local services.
•
Remain an employer of choice in our local
communities, attracting and retaining the
best talent.
•
A business that acts with integrity and
operates in a safe, responsible and
sustainable way.
•
A reduction in environmental impact,
including improvements in UK food waste,
carbon emissions and packaging.
•
Support for local community initiatives
and provision of economic opportunities
for local people.
•
A business that looks after the health,
safety and wellbeing of its colleagues.
OUR SUPPLIERS
OUR COMMUNITIES
OUR INVESTORS
66
| Bakkavor Group plc | Annual Report & Accounts 2023
STAKEHOLDER ENGAGEMENT
CONTINUED
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
How the Group Board engages
How the Company engages
How we are responding
•
Daily engagement via procurement
colleagues including workshops and
conferences.
•
Ensures supplier relationships are
built on a foundation of contractual
mutual agreement.
•
Agrees terms of supply whilst
regularly reviewing performance and
improvement plans.
•
Sets expectations of UK suppliers via
the Supplier Code of Conduct. This is
the basis of our Responsible Sourcing
strategy, including Human Rights,
Environmental Sustainability and
Technical Integrity.
•
Utilises the Sedex online supply chain
platform to monitor and assess labour
practices in our supply chain.
•
Investor meetings, calls, conferences
and events attended by the CEO, CFO
and Head of Investor Relations.
•
Welcomes queries from shareholders
via phone, post, email or via brokers.
•
Updates relevant shareholder
communications via bakkavor.com.
Includes the Annual Report and
Accounts, financial results releases,
share price information, RNS and
press releases.
•
Reports on the TCFD and the Carbon
Disclosure Project.
•
Oversees our Trusted Partner ESG
strategy, commitments and progress
through the ESG Committee with updates
provided to the Group Board and from the
CFO (Group Board Sponsor for ESG).
•
Considers climate-related issues alongside
the long-term strategy of the Group,
which informs investment decisions.
•
Has oversight of the climate transition plan.
•
Reviews and considers community
initiatives, as well as how we are
delivering on their progress, including our
charity partnerships.
•
Supports local communities across
charities, schools, sports teams and
projects through fundraising,
donations, volunteering and
educational activities.
•
Establishes Group charity
partnerships and fundraises for these
with a charity events programme.
•
Undertakes food redistribution
via partners and colleague outreach
to charities.
•
Provides employment opportunities,
including apprenticeships and graduate
placements, via the use of agencies.
•
UK food waste reduced by 7,960 tonnes
compared to 2022, from 8.1% to 6.6%, an
improvement of 150 basis points and the
equivalent of a 20.7% reduction year-on-year.
•
Actively engage each of our UK and US sites
to maximise surplus food available for
redistribution.
•
Industry-leading early careers programmes;
voted the top FMCG company for apprentices
for the fourth year running by TheJobCrowd,
the UK’s leading Job Graduate Review site.
•
£236,000 of charitable donations in 2023,
including to our Group charity partners
GroceryAid and Natasha Allergy Research
Foundation.
•
Launched a charity matched-giving scheme,
whereby each of our sites receives an annual
budget of up to £2,500 to match funds raised
by their site.
•
Reviews procurement updates to understand
how we mitigate inflationary headwinds
and supply chain disruption.
•
Receives updates on raw material
sourcing, potential issues and action
taken to minimise disruption.
•
Receives updates on centralised
category procurement structure and
the Bakkavor Inbound Logistics (“BIL”)
centre of excellence.
•
Has oversight of our Responsible
Sourcing strategy, commitments and
progress through our ESG Committee
and Group Board ESG Sponsor.
•
Reports financial updates with detail of
inflation impact and recovery levers, with
the CFO providing additional commentary
in Group Board meetings.
•
Engages with the CEO and CFO regarding
plans to tackle supply chain issues.
•
Receives updates on ‘supply chain’
principal risk developments via the Audit
and Risk Committee.
•
Leveraged scale, experience and strong
customer partnerships to enhance buying power
and mitigate the impact of industry challenges.
•
Forward-purchased certain raw materials and
energy for good visibility of costs through 2023.
•
Reviewed sourcing plans to build further
resilience in our inbound supply chain.
•
Worked with suppliers to identify potential
issues and action to minimise disruption.
•
Worked with customers on supply performance,
collaborative buying and cost models.
•
Increased supplier payment facility to provide
further opportunity to receive payment early.
•
Introduced additional requirements around
environmental action to our UK Supplier Code
of Conduct and self-assessment
questionnaires to improve understanding of
human rights risks in supply chain.
•
Continued rolling out our Group Supplier
Conduct Policy, adapting the UK Supplier Code
of Conduct to support supply chain engagement
on social issues within the US and China.
•
CEO and CFO engage regularly with
investors to gather feedback across
governance, performance and strategy.
•
Chairman actively seeks to engage with
shareholders. Senior Independent
Director and Committee Chairs available
for direct meetings where required.
•
Attends the Annual General Meeting (“AGM”).
•
Reviews updates on shareholder and
analyst feedback and shareholder
register composition.
•
Receives updates and feedback from brokers
on wider investor sentiment, how the market
views Bakkavor and areas of focus.
•
Approves all financial results: full and
half-year results, Annual Report and
Accounts, and trading updates.
•
Oversees the Group’s allocation of
capital, including dividend payments
and leverage targets.
•
Reviews regular updates on our Trusted
Partner ESG strategy, commitments
and progress.
•
Released a full-year, half-year and quarterly
trading update to update on business
performance and outlook.
•
Over 50 meetings with investors and analysts
in 2023, attended by the CEO, CFO and Head
of Investor Relations.
•
Invited shareholders to attend the 2023 AGM.
•
Discussed: inflation and supply chain impact;
volumes and consumer behaviours; capital
allocation approach (leverage, dividend); and
outlook on our US and China regions.
•
Delivered against three-point strategic plan.
•
Approved final 2023 dividend of 4.37 pence per
Ordinary share, taking the total to 7.28 pence.
•
Strong balance sheet with 1.5x leverage
maintained within medium-term target range.
•
Regularly engaged with analysts to discuss
business performance, guidance and review
of financial models.
•
Reported under TCFD requirements and built
further on our ambitions by submitting Net
Zero aligned targets for all scopes to the
Science Based Targets initiative (“SBTi”).
Bakkavor Group plc | Annual Report & Accounts 2023 |
67
Building stronger
foundations for the future
We protected profitability
while delivering
significant debt reduction
and improving leverage.
Ben Waldron
Chief Financial Officer
FINANCIAL REVIEW
68
| Bakkavor Group plc | Annual Report & Accounts 2023
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
Group reported revenue increased by 3.0% to £2,203.8m
(2022: £2,139.2m). LFL revenue, which excludes the 53rd
week in 2022 and the impact of currency movements,
increased by 5.3% to £2,214.2m (2022: £2,103.2m). Of this
growth, 5.4% was price, whilst volumes declined marginally
by 0.1% as consumers reduced their spending in response
to the more challenging economic conditions.
UK reported revenue was up 3.9% (2022: £1,783.1m) and
up 5.7% on a LFL basis (2022: £1,752.3m), to £1,852.7m.
This was primarily driven by price increases to mitigate
significant inflation seen across our cost base, which
was offset in part by a decline in volumes as consumers
started to cut back on more discretionary purchases.
US reported revenue decreased by 10.1% to £229.4m (2022:
£255.3m), driven by the previously reported loss of a single
customer that occurred in November 2022, and reduced
product launches in 2023 as we sought to simplify our
business and address profitability challenges. Underlying
sales growth, however, remained strong as we continued
to benefit from growth in the fresh meals space.
In China, reported revenue increased by 20.7% to £121.7m
(2022: £100.8m), driven primarily by increased volumes
as a result of post-Covid recovery and expanding our
retail propositions. LFL revenue was up 32.0% to £130.9m
(2022: £99.2m).
ADJUSTED OPERATING PROFIT
Adjusted operating profit increased by £4.9m to £94.3m
(2022: £89.4m) despite persistent inflationary pressures
and lower volumes arising from the cost of living crisis,
which was particularly pronounced in the UK.
The Group faced £133m of cost inflation in 2023, which
represented a 6.5% increase on our total cost base. This was
on top of £230m in 2022, representing 14% of inflation.
Mechanisms allowing certain inflation to be passed to
customers through an increase to our selling price continued
to work well. Customers provided further support in certain
areas where mechanisms were not already established. In
2023, 86% of inflation was recovered through a combination
of these means.
The dual impact of unrecovered inflation and lower
volumes had a negative impact on our profitability. Our own
internal levers were, therefore, fundamental to enhancing
our profitability. The completion of our restructuring
initiatives and the implementation of operational initiatives
at factory level contributed £27.9m to our bottom line.
From a margin perspective, it was encouraging to see
adjusted operating profit margins stabilise at 4.3%
(2022: 4.2%).
OPERATING PROFIT
Operating profit of £97.1m (2022: £37.8m) led to an
improving margin of 4.4% (2022: 1.8%).
Operating profit includes the following exceptional items
that are excluded from adjusted operating profit:
£m
2023
2022
Profit on disposal of property,
plant and equipment
1.5
–
Profit on disposal of associate
1.4
–
Corporate restructuring costs
–
(5.3)
Restructuring provisions:
– Closure costs
2.2
(11.8)
– Impairment charges
0.6
(19.5)
US impairment charges
(2.9)
(3.8)
Associate investment impairment
–
(9.7)
Total exceptional income/(expense)
2.8
(50.1)
In 2023, operating profit includes a net £2.8m of exceptional
income, excluded from adjusted operating profit. This
includes £2.9m of income relating to simplifying our
operations in China: a £1.5m gain from the sale and
leaseback of a property in Hong Kong and a £1.4m from the
sale of our associate investments. Another £2.8m of income
relates to the release of provisions, which we accrued in
2022 for UK restructuring activity. This provision is no
longer needed and has been released. This is offset by
£2.9m of net impairment charges in the US, mainly relating
to unused assets.
FINANCE COSTS
Group profit before tax was £70.3m (2022: £18.1m). This is
after finance costs (net) of £26.8m (2022: £20.8m), which
increased due to the impact of rising interest rates, although
this was partly offset by the benefit from the significant
reduction in debt levels during the year. To hedge against
movements in base rates, the Group has £150m of fixed
interest rate swaps in place until March 2024, at an average
rate of 37 basis points. The Group has a total of £130m of
fixed-rate interest swaps from March 2024 until March 2026
at an average rate of 373 basis points. We expect the increase
in interest rate, driven by the change in our fixed-rate swaps
and the full year impact of higher base rates, to be offset by
our lower level of debt and therefore finance costs for 2024
will be similar to that incurred in 2023.
TAX
The Group tax charge for 2023 was £16.4m (2022: £5.6m),
representing an effective tax rate of 23.4% (2022: 30.9%).
The underlying effective tax rate, which excludes
exceptional and adjusting items and change in fair value of
derivative financial instruments, was 24.4% (2022: 21.5%).
The most significant increase in the underlying effective tax
rate is driven by an increase to the UK corporation tax rate
from 19% to 25%, which became effective in April 2023.
We continue to expect our 2024 effective tax rate to be
marginally above the UK corporation tax rate.
REVENUE
£m
2023
52 weeks
2022
53 weeks
Change
reported
Change
like-for-
like (“LFL”)
Revenue
2,203.8
2,139.2
3.0%
5.3%
Bakkavor Group plc | Annual Report & Accounts 2023 |
69
EARNINGS PER SHARE
Basic earnings per share increased by 7.2 pence to 9.4
pence for 2023 (2022: 2.2 pence), driven by the combination
of improved trading profit and lower exceptionals, although
this was partly offset by higher finance and tax costs.
Adjusted earnings per share decreased by 0.7 pence to
8.8 pence in 2023 (2022: 9.5 pence) as the improvement to
adjusted operating profit was offset by increased interest
and tax costs.
CASH FLOW
The Group generated £103.2m of free cash flow (2022:
£53.4m) which was £49.8m higher than 2022, reflecting
improved operating profit, a disciplined approach to capital
expenditure and an enhanced focus on working capital.
In line with our focus on managing cash, outlined in early
2023, we have sought to drive improvement in working
capital, focused predominantly on inventory management.
Our inventory levels had risen over the last three years to
protect the business from supply chain disruption and to
avoid significant levels of inflation. During this year, the
supply chain has shown signs of stabilising, and we have
therefore commenced an exercise to return inventory to
more normalised levels, which is driving the improved
and sustainable working capital performance.
£m
52 weeks
ended
30 December
2023
53 weeks
ended
31 December
2022
Operating profit
97.1
37.8
Exceptional and adjusting items
(2.8)
51.6
Depreciation and other items
73.8
69.1
Net retirement benefits
charge less contributions
(2.1)
(2.2)
Working capital (excl.
exceptional items)
28.4
(1.7)
Interest and tax paid
(36.2)
(24.1)
IFRS 16 lease payments
(12.0)
(13.4)
Dividends received from
associates and interest
received
0.8
0.2
Purchases of property,
plant and equipment (net)
(40.3)
(61.0)
Purchases of intangible assets
(3.5)
(2.9)
Free cash flow
103.2
53.4
DEBT AND LEVERAGE
The improvement in cash generation has led to a reduction in
operational net debt of £55.3m to £229.6m (2022: £284.9m).
Leverage, the ratio of operational net debt to adjusted
EBITDA, improved by 0.4 times to 1.5 times for 2023 and is
at the bottom end of the Group’s target range of 1.5 to 2.0
times. The Group’s liquidity position remains strong, with
headroom of over £260m against our core debt facilities
of £493m. The Group continues to have comfortable
headroom against all financial covenants.
Now we are at the lower end of our leverage range, we
have reset our target to 1.0 to 2.0x. We expect a further
small reduction in debt, despite an increasing level of
capital investment, through a combination of working
capital improvements and enhanced profitability.
DIVIDEND
During the period, the Group paid £24.0m in respect of
the final dividend for 2022 and £16.8m for the 2023 interim
dividend declared in September.
The improved strength of the Group’s financial position
and continued good cash generation support our long-
term growth aspirations and commitment to increasing
returns to shareholders. We propose a final dividend for
2023 of 4.37 pence per Ordinary share, resulting in a total
dividend for 2023 of 7.28 pence per Ordinary share. This
represents an increase of 5% on the prior year. If approved by
shareholders, the final dividend will be paid on 29 May 2024.
Going forward, the Board expects to maintain a
progressive dividend policy.
CAPITAL ALLOCATION
We maintain a disciplined approach to capital allocation,
with the overriding objective to enhance shareholder value.
The allocation of capital is primarily split across capital
investment, debt reduction to decrease financing costs
given recent increases to base rates, and dividends.
Inorganic opportunities are considered where they are a
strategic fit for our business. In the medium-term, we
remain committed to investing to enhance returns, and are
focused on reducing leverage whilst maintaining a
progressive dividend policy.
INVESTMENT AND RETURNS
The Group’s ROIC for the 12 months to 30 December 2023
was 7.5%, ahead of the prior year of 7.1%. The increase
of 40 basis points is driven by a lower invested capital
balance following footprint rationalisation in the UK as
part of a wider restructuring plan and a more disciplined
approach to capital spend.
The Group continues to expect an improvement in ROIC
in the medium-term as previous investments deliver an
increase in returns. These investments include three key
projects: investment in our Crewe factory; consolidation
of our Desserts business following the closure of Desserts
Leicester; and investment in our US Charlotte site.
After a planned year of restricted capital spend, we now
expect investment to return to more normal levels, of
c.£70m for FY24.
70
| Bakkavor Group plc | Annual Report & Accounts 2023
FINANCIAL REVIEW
CONTINUED
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
Included within this investment is c.£10m, which represents
the first stage of replacing our aged UK ERP systems. We
expect the total cost of this project to be between £35m and
£40m, which will be incurred over the next three to four
years, and as per 2024, will be funded through normal
levels of capital investment. Recent changes to accounting
standards may mean certain elements of this spend will
be expensed and recognised as exceptional costs. If costs
are expensed then the level of capital investment will
reduce proportionately, so the cash impact will be neutral.
READ MORE
pg 116.
PENSIONS
Under the IAS 19 valuation principles, the Group recognised
a surplus of £12.0m for the UK defined benefit scheme for
2023 (31 December 2022: surplus of £12.8m). The plan
assets slightly increased their value but the defined benefit
obligations also increased due to lower discount rates.
The Group and the trustee agreed the triennial valuation of
the UK defined benefit pension scheme as at 31 March 2022
in May 2023, which resulted in a funding shortfall of £2m.
This funding shortfall increased in the following months due
to the volatility in gilt rates which resulted in investment
values falling by more than the reduction in liabilities. As a
result of the increase to the funding shortfall, a recovery
plan for payments of £2.5m p.a. was agreed to be made
through to 31 March 2025, with an extension through to
31 August 2025 if the scheme is in deficit at the end of
December 2024 and the end of January 2025.
SUMMARY
The Group delivered a good performance during the year and,
importantly, built stronger foundations from which to deliver
future profitability. Revenue growth reflected our success
in taking pricing action to offset continuing inflationary
pressures, whilst internal levers were fundamental in
delivering progressive adjusted operating profit that was
ahead of market expectations. We exit the year with
momentum in all three of our regions, a stronger balance
sheet, and sufficient financing headroom and interest rate
protection in place to deliver further progression in FY24.
Ben Waldron
Chief Financial Officer
4 March 2024
Like-for-like revenue
2
£2,214.2m
+5.3%
2022: £2,103.2m
Adjusted operating
profit
1,2
£94.3m
+5.5%
2022: £89.4m
Free cash flow
2
£103.2m
+£49.8m
2022: £53.4m
Adjusted earnings per share
1,2
8.8p
-0.7p
2022: 9.5p
Leverage ratio (net debt/
adjusted EBITDA pre IFRS 16)
2
1.5x
-0.4%
2022: 1.9x
Return on invested capital
(“ROIC”)
2
7.5%
+40bps
2022: 7.1%
Performance year-on-year
Improved
Worsened
Maintained
1
The Group’s STIP scheme and long-term incentive awards are based on performance across a selection of three
KPIs. See pg 130 in the Directors’ remuneration report.
2
Alternative Performance Measures (“APMs”), including ‘like-for-like’, ‘adjusted’ and ‘underlying’, are applied
consistently throughout the 2023 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.
Group
highlights
Bakkavor Group plc | Annual Report & Accounts 2023 |
71
Our risk management process is
designed to support the Group as
we set out to deliver our long-term
sustainable value, whilst protecting
the interests of our stakeholders and
safeguarding our assets, finances and
reputation. We have an established
risk management framework to
identify, assess, mitigate, monitor,
report and escalate the risks our
business faces. This has proven
successful in the face of global
economic volatility and has allowed
us to strike the right balance
between risk and opportunity.
OUR APPROACH
We have a successful and proven
approach to risk management which
has been fundamental in ensuring
we meet our strategic objectives.
The Group Board is responsible for
effective risk management and has
embedded a strong culture of risk
awareness across the Group. The
Group Board has achieved this by:
•
Challenging key strategic and
emerging risks to support the Group
in delivering its strategic objectives.
•
Reviewing and approving 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 appropriate level of return.
•
Reviewing our formal Risk Register.
This identifies:
—The principal risks faced by
the Group.
—The likelihood of their occurrence.
—The potential impact on the Group.
—The key mitigating actions used
to address them.
Ownership of each principal risk is
assigned to a Senior Executive. The
Risk Register also outlines how we
plan to minimise future probable
risks through Bakkavor’s policies and
procedures, Code of Conduct and
business ethics. It is updated on a
quarterly basis, reviewed by the Audit
and Risk Committee (“A&RC”), and
subsequently the Group Board.
The A&RC 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 a regular review of:
•
Reports received from the
Senior Executive Team (“SET”)
and Risk Committees.
•
The output of internal audit
work performed by our external
adviser, KPMG.
•
The output of external audit
work performed by our External
Independent Auditors,
PriceWaterhouseCoopers LLP
(“PwC”).
•
Advice from other experts
and advisers.
These reports provide detail on
current and emerging risks related to
business activity, as well as looking
at how effectively the internal
controls deal with these risks, and an
update on how approved mitigating
actions are being implemented.
RISK MANAGEMENT FRAMEWORK
Our risk management framework
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 which include
clear allocation of responsibilities and
timescales for completion. These
actions will be subject to the level of
appetite determined by the Senior
Executive Team, reviewed by the A&RC,
and subsequently approved by the
Group Board. Progress towards
implementing these plans is monitored
on a timely basis and reported in the
quarterly Risk Committee meetings,
with the output relayed to the Group
Board through the A&RC.
RISK APPETITE
As with every year, the Group Board
reviews and sets our risk appetite for
each of the principal risks. This helps
us to provide clear boundaries on the
acceptable level of risk and influences
our decision-making to support the
delivery of our strategic objectives.
Our approach is to minimise exposure
to reputational, financial and
operational risk, whilst accepting a
risk/reward trade-off in supporting
the delivery of our strategic objectives.
As a producer of fresh food, food
safety and integrity are of paramount
importance. We therefore have a low
appetite for risks which may impact
this area, with all practical efforts
made to mitigate them. A low-risk
appetite is also applied to health and
safety. As a large employer, we take
all practical precautions to ensure the
health and safety of our colleagues
whilst on our sites in compliance with
laws and regulations.
RISK MANAGEMENT AND RISKS
Our approach to
risk
A process that underpins the sustainable delivery of our strategic objectives.
72
| Bakkavor Group plc | Annual Report & Accounts 2023
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
•
Reports to the Group Board on the effectiveness of the risk management process and internal
control system.
•
Informed by regular reports from the Risk Committee’s and Internal and External Auditors.
READ MORE
on pg 116 for the activities of the A&RC in full-year 2023.
•
Maintain the Risk Register with assignment of individual principal risks.
•
Manage and monitor their own risks through timely review.
•
Escalate additional risks and evolutions in existing or emerging risks to their respective Risk
Committees for review.
•
Provide regular reports to the Risk Committees, A&RC and Group Board from key functions such
as Technical (including health and safety, food safety), HR, Finance, Legal and IT.
•
Ensures the effective identification and management of key strategic and emerging risks.
•
Outputs from the individual regional and Corporate Risk Committees are summarised and
presented to the A&RC on a quarterly basis.
GROUP BOARD
RISK COMMITTEE
SENIOR EXECUTIVES AND OTHER MANAGEMENT
AUDIT AND RISK COMMITTEE
•
Perform a quarterly review of the principal and emerging risks outlined in the Risk Register.
•
Provide a summary of the changes to the Senior Executive Team (“SET”).
•
Each chaired by the Finance Director – Transformation, Treasury & Risk with SET representation.
Corporate Risk
Committee
UK Risk
Committee
US Risk
Committee
China Risk
Committee
TOP-DOWN APPROACH
Identification of the Group’s
principal risks
BOTTOM-UP 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.
•
Reports directly to the A&RC.
•
Agrees planning annually, with input and
oversight from the Finance Director –
Transformation, Treasury & Risk.
•
Audits are financial and risk-based, and
aligned with the 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.
•
Reports directly to the A&RC.
•
PwC provides 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.
Internal Audit
External Audit
•
Report to the SET.
•
Comprises a number of external parties, including: BRCGS unannounced and announced
audits of food safety across UK sites; and other subject matter experts across insurance,
property, health and safety, and cyber.
Other external parties
UNDERPINNED BY OUR RISK MANAGEMENT PROCESS
IDENTIFY
ASSESS
MITIGATE
MONITOR
REPORT & ESCALATE
Our risk management process and framework
Bakkavor Group plc | Annual Report & Accounts 2023 |
73
RISK ASSESSMENT MAP
•
The risk heat map shows the position of each principal risk as at December 2023 compared to the position in
December 2022.
•
The commentary on the following pages gives updates on each of our principal risks.
Principal risks
Likelihood
(after mitigation)
Business impact
(after mitigation)
1.
Consumer demand and retailer
landscape
2.
Food safety and integrity
3.
Strategic growth and change
programmes
4.
Health and safety
5.
Supply chain
6.
Availability, recruitment and
retention of colleagues
7.
IT systems and cyber risk
8.
Climate change and sustainability
9.
Disruption to Group operations
10.
Corporate and regulatory
Risk trend
2023
Risk movement; December 2022 to December 2023
New
Increased
Decreased
Unchanged
Risk trend
OUR PRINCIPAL RISKS
In reviewing our risk environment, we
have reduced the number of principal
risks from 15 down to 10. This reduction
reflects our current risk environment
and allows us to increase our focus
on the key risks to the business.
We have removed the ‘Covid’ principal
risk as we have been managing this
risk since the start of the pandemic
and mitigation activities are now part
of business as usual. We have merged
RISK MANAGEMENT AND RISKS
CONTINUED
three principal risks: ‘Consumer
behaviour and demand’; ‘Competitors’;
and ‘Reliance on a small number of key
customers’, with a new principal risk
on ‘Consumer demand and the retailer
landscape’. ‘Brexit’ has also been
removed as this principal risk now forms
part of ‘Supply chain’ and ‘Consumer
demand and retailer landscape’. Finally,
we have combined two further principal
risks, ‘Treasury and pensions’ and ‘Legal
and regulatory’, to create one single
‘Corporate and regulatory’ principal risk.
These changes have allowed us to
streamline our risk reporting processes
whilst still ensuring we provide an
appropriate level of oversight over
principal risks within the organisation.
READ MORE
pg 76.
We have rebased our risk heat map
from 2022 to reflect the ten principal
risks in 2023.
74
| Bakkavor Group plc | Annual Report & Accounts 2023
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
EMERGING RISKS
We recognise the importance of
future-proofing our business. In order to
do this, we are not only assessing risks
that are affecting us today, but also
looking ahead to identify what has the
potential to adversely impact us in the
future. As part of our risk assessment
process, both top-down and bottom-
up, we seek to capture and monitor
emerging risks. Their potential effects
on the delivery of our strategy are
considered at our regular risk reviews,
using horizon scanning inputs from both
internal and external sources. Emerging
risks are highlighted during each
regional Risk Committee meeting
and then discussed with the A&RC
on a quarterly basis.
Emerging risks of particular note:
•
Artificial Intelligence is increasingly
being used by businesses. We will
conduct an analysis over the next
12 months about the risks and
opportunities this may present for us.
•
In recent years there have been a
number of geopolitical events which
have significantly impacted our
business, such as rising energy costs
which remain volatile. These events
also have the potential to impact
the wider economic environment in
terms of overall inflation, availability
of ingredients, consumer demand
and financing costs. There will be a
general election within the UK later
this year and changes in legislation,
which could have an impact on a
number of our principal risks.
•
The scarcity of the labour market
across all three of our regions
could see significant inflation in
labour costs.
•
Whilst inflation has slowed in the
second half of 2023, there is the
potential for further inflation which
could impact interest rates and
lead to a recession, resulting in
further pressures on sales volume.
We have also started to explore potential
options for replacing our UK ERP
system. During 2023 we underwent a
‘discovery’ stage. The Group Board
approved the project in February 2024
and we are now moving onto a ‘detailed
design’ stage. This project will increase
our risks in ‘Strategic growth and
change programmes’ and ‘IT systems
and cyber risk’.
These emerging risks are kept under
review during our regional Risk
Committee meetings and mitigating
actions are discussed and documented.
This ensures that we are able to react
ahead of any risk materialising,
therefore minimising our risk exposure.
INTERNAL CONTROL SYSTEM
Our internal control system provides a
structure and an ongoing process for
risk management. This helps assure
our Senior Executives and operational
management that processes have been
implemented effectively to manage
operational risk. The system is designed
to manage rather than eliminate all
risks in line with the risk appetite set out
by our Group Board. This is combined
with a central governance framework
which supports the business through
Group-wide policies, procedures and
training. Our Operational Management
team is responsible for implementing
procedures and monitoring controls.
RISK ASSURANCE
Risk assurance is delivered using the ‘four lines of defence’, which comprises:
Management controls
Includes a suite of
policies and procedures
governing day-to-day
activities as well as
related management
information and data.
Ensuring our staff are
trained to fulfil their
duties is also key to
following our processes
and work within our
control framework.
Management also
submits bi-annual
self-assessments.
1st line
Central Functional
teams
Our Central Functional
teams provide oversight
by attending working
groups/committees.
Central teams regularly
monitor and report
against KPIs.
2nd line
Internal and other
independent audits
Performed on key
risks, with our Internal
Audit outsourced to
KPMG. Also includes
independent audits
from food safety and
health and safety
experts, announced
and unannounced
customer audits and
insurance audits.
3rd line
Regulatory audits
Conducted by the
British Retail
Consortium (“BRC”)
food safety audits, with
other regulatory bodies
including but not limited
to: the Environmental
Health and Trading
Standards; the Health
and Safety Executive;
the FDA; the USDA; and
external financial audits
performed by our
External Auditors PwC.
4th line
Bakkavor Group plc | Annual Report & Accounts 2023 |
75
RISK MANAGEMENT AND RISKS
CONTINUED
1. CONSUMER
DEMAND AND
RETAILER
LANDSCAPE
Could be driven by a
significant change to the
economy as well as changes
in consumer attitudes, e.g.
cost of living concerns,
sustainability and health.
The loss of business as a
result of competitor activity,
significant changes in
commercial terms, and/or
reputational damage could
result in a loss of market
share, leading to a significant
impact on the Group’s results.
Risk
Description
Controls
•
Work closely with customers to adapt to
changing consumer trends, such as dietary
changes, sustainability concerns and the
impact of cost of living pressures.
•
Leverage insight from market data analysis,
consumer surveys/feedback and industry
reports to inform new and existing product
development to meet consumers’ needs.
•
Draw on a well-established global supply chain
to source a wide range of ingredients to help
drive innovation.
•
Ensure integrity of supply chain and the quality
of raw materials through our Responsible
Sourcing approach.
•
Maintain well-established, multi-level
relationships with key customers to deliver
high levels of service.
Link to our strategy
READ MORE
pg 16.
2. FOOD SAFETY
AND INTEGRITY
Whilst we must ensure food is
safe and clearly and correctly
labelled, there are still risks
of product contamination.
This could affect consumer
confidence and customer trust,
potentially leading to product
withdrawal or recall, financial
and/or reputational impact, and
loss of/reduction in business.
•
Maintain industry-leading standards of food
safety. Includes traceability procedures and
processes, overseen by experienced Central
Technical function, and clear approach to
Responsible Sourcing under our Trusted
Partner ESG strategy. Following issues in
the wider industry highlighted by the Food
Standards Agency, we also completed a
review of our UK meat supply chain to gain
assurance over the robustness of our
processes and of our supply chain.
•
Use Hazard Analysis Control Point principles at
all sites to identify and control food safety risks,
with colleagues trained in these procedures.
•
Monitor performance against established food
safety metrics, managed via a team of
technical/food safety experts at each site.
•
Report metrics on a monthly basis to the
Group Board.
•
Conduct regular audits against recognised
global food safety standards by our internal
Central Technical team, and independent bodies
on an announced and unannounced basis.
•
Perform regular industry-leading allergen testing
to monitor our controls and raw materials.
•
Continue to monitor emerging issues, in
conjunction with other industry players, to ensure
increasing compliance requirements are met.
READ MORE
pg 38.
Link to our strategy
Principal
risks and uncertainties
UK:
drive returns by
leveraging our UK
number one 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 people, customers,
suppliers and communities
Link to our strategy
Risk trend
Due to our
mitigating actions
regarding food
safety we consider
the likelihood
of this risk
crystallising to
now be lower. A
combination of
strong results
from customer
audits and the
decline of listeria
identification
across our
factories
evidences the
effectiveness of
our mitigations.
We’ve also seen
the UK Food Safety
Audit scores
showing strong
results with
reducing listeria
finds across the
UK factories.
76
| Bakkavor Group plc | Annual Report & Accounts 2023
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
3. STRATEGIC
GROWTH AND
CHANGE
PROGRAMMES
Investments in capital,
resource and organisational
change based on forecasted
financial returns are by their
nature uncertain. Climate
change, in terms of acute
and chronic risks, also
has the potential to impact
future investments.
•
Leverage the Group’s Capital Allocation Policy
to balance spend across capital expenditure,
acquisitions and disposals, debt reduction
and dividends.
•
Maintain robust and standardised processes for
evaluation and approval of capital expenditure.
•
Implement governance processes for key
projects including new IT systems, to ensure
individual project risks are documented and
action plans are implemented to reduce and
mitigate risks.
•
Track and report regularly to the Group Board
on performance of significant projects against
forecast metrics.
Risk
Description
Controls
Risk trend
Increased
Decreased
Unchanged
New
(refer to principal risks pg 76, 80)
4. HEALTH AND
SAFETY
We have a duty 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 a significant reputational,
regulatory and/or financial
impact on our business.
•
Maintain strong health and safety processes
and controls across all sites, supported by
an established culture of engagement around
accident prevention.
•
Health and safety managed locally by
colleagues at sites, supported by in-house
health and safety experts.
•
Review and share standards and best practice
and support implementation of new processes
and controls.
•
Manage health and safety on a digital platform
with readily available information to monitor
performance at each site against key health
and safety metrics.
•
Undertake risk control and risk reduction
activities across health and safety projects
including:
— Ammonia risk assessment.
— Boiler reviews.
— Factory transport vehicles.
— Fire suppression.
— Machinery.
•
Report metrics to the Group Board, with any
significant issues reported immediately.
READ MORE:
Non-financial KPIs pg 6.
ESG: Trusted Partner pg 44.
Link to our strategy
Link to our strategy
Risk trend
Bakkavor Group plc | Annual Report & Accounts 2023 |
77
5. SUPPLY CHAIN
The loss and/or interruption
from a major supplier could
affect factory operations and
customer service levels.
External factors such as
climate change, the current
war in Ukraine and the
conflict in Israel/Palestine
could also expose suppliers
to acute and chronic risks,
driving inflation and impacting
availability and quality.
Risk
Description
Controls
•
Maintain a sophisticated, agile supply chain
and robust supplier selection with monitoring
and management processes.
•
Leverage scale, experienced central and
regional procurement teams and strong
customer partnerships to enhance buying power.
•
Balance price, quality, availability and service
levels to meet demand and supply forecast.
•
Seek protection on forward-purchasing and price
variations through agreements with customers
including cost pass-through mechanisms.
•
Utilise internal levers to mitigate the impact of
input cost price increases, drive productivity
improvements, and focus on value optimisation
across product portfolios.
•
Increase end-to-end control of our supply
chains through our Bakkavor Inbound Logistics
(“BIL”) team.
•
Leverage technology to support the drive for
standardisation and efficiency in managing
complex supply chains.
6. AVAILABILITY,
RECRUITMENT
AND RETENTION
OF COLLEAGUES
Labour availability and cost
could be affected by political,
economic, legislative and
regulatory developments.
Increasing competition from
competitors and/or local
employers could reduce the
availability of labour and
increase cost pressure.
•
Manage recruitment through our Central
Talent team, supported by regional Heads of
HR, to drive campaigns and initiatives tailored
to the local market and the offer of competitive
remuneration and benefits packages.
•
Invest in training and development to upskill
colleagues and support career progression,
including a new ‘Better Behaviours, Better
Bakkavor’ workshop launched in 2023 which
is aimed at I&D and embedding our values.
•
Enhance and upgrade site facilities to make
Bakkavor a better place to work.
•
Conduct an Employee Engagement Survey
(“EES”) annually to gather feedback from
colleagues.
•
Seek to fill vacancies through direct
recruitment and utilise agency labour
to provide short-term solutions.
•
Ongoing engagement with employee
representatives, including unions, to
build relationship and understanding
of key issues.
READ MORE
pg 30.
RISK MANAGEMENT AND RISKS
CONTINUED
Link to our strategy
UK:
drive returns by
leveraging our UK
number one 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 people, customers,
suppliers and communities
Link to our strategy
Link to our strategy
Risk trend
Due to mitigating
actions taken,
combined with an
improving labour
market in the UK
and the US
evidenced in the
reduction of
employee
turnover and the
level of ongoing
vacancies, we now
consider the
likelihood of this
risk crystallising
as being lower.
Over the last 12
months we have
successfully
implemented
actions to
minimise the
impact of inflation.
Given the easing
of purchasing
inflation coupled
with the
successful
implementation
of our actions we
deem the impact
of this risk to
have reduced.
78
| Bakkavor Group plc | Annual Report & Accounts 2023
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
7. IT SYSTEMS AND
CYBER RISK
Group infrastructure
becomes out-dated,
inefficient and/or vulnerable
to attack or malfunction.
Unauthorised access to the
Company’s IT systems could
lead to data breaches and the
release of market-sensitive
information, with potential
reputational, financial and
operational impact. 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.
Risk
Description
Controls
•
Actively identify risks and threats, design and
implement layers of control that allow for an
appropriate balance between preventive and
detective controls. Includes business continuity
planning and testing, phishing simulation,
extended security detection and response.
•
Evaluate independently against leading
industry standards published by the US
Department of Commerce (National Institute
of Standards and Technology Cyber Security
Framework), and partner with external expert
advisers to actively reduce risks posed.
•
Mitigate information security risks through
a Group-wide security programme. This
security programme provides a robust and
consistent approach to information security
across the Group.
•
Invest further in IT system modernisation
including external advice on the use of
Artificial Intelligence in our sector.
8. CLIMATE
CHANGE AND
SUSTAINABILITY
A scenario-driven climate risk
assessment of our business
has identified four transition
risks: costs of implementing
low emissions technology;
increased cost of raw
materials; changing consumer
preferences; and pricing of
GHG emissions. We have also
identified two physical risks:
operations and supply chain.
We also consider the potential
reputational impact of failing
to meet our ESG commitments
as outlined under our Trusted
Partner ESG strategy.
•
Mitigating risks against the identified climate
risks is detailed in the TCFD section.
•
Addressing our wider material ESG activities
through Trusted Partner, our ESG strategy.
•
Regularly monitor and report on non-financial
KPIs, including net carbon emissions, UK food
waste, regular voluntary employee turnover,
packaging use and health and safety.
•
Seek to integrate ESG factors into investment
decisions and wider financial forecasts.
READ MORE:
ESG: Trusted Partner pg 44.
ESG: TCFD pg 50.
Risk trend
Increased
Decreased
Unchanged
New
(refer to principal risks pg 76)
Link to our strategy
Link to our strategy
Risk trend
Bakkavor Group plc | Annual Report & Accounts 2023 |
79
RISK MANAGEMENT AND RISKS
CONTINUED
9. DISRUPTION
TO GROUP
OPERATIONS
Damage to our sites by fire,
flood, mechanical breakdown
and natural disaster, or
disruption from industrial
action, could present a serious
risk to our business operations
and performance. Significant
capital investment projects
could also impact our ability to
maintain production at required
levels, negatively impacting
our financial performance.
Risk
Description
Controls
10. CORPORATE
AND
REGULATORY
Failure to comply with local
laws, regulations, codes of
practice, or breach of internal
policies and standards could
impact our reputation,
resulting in financial penalties
and operational disruption.
External financial risks
include interest rate risk on
borrowings, availability of
liquidity, compliance with our
financial covenants, changes
in exchange rates and the
funding of the defined benefit
pension scheme.
•
Regularly review the Group’s investment
strategy and its potential impact on liquidity
and leverage.
•
Oversee framework of Group Board-approved
policies and procedures for financial risk
management; includes funding, liquidity,
currency, interest rate and counterparty credit
overseen by Treasury function.
•
Monitor financial results and projections
through weekly, monthly and quarterly
reporting and forecasting.
•
Meet quarterly with the Group Hedging
Committee to review and ensure compliance
with hedging policy for foreign currency.
•
Regularly review defined benefit
pension scheme’s investment and
liability hedging strategy.
•
Monitor relevant laws and regulations across
the business to ensure compliance across
legal, financial, tax, HR, food safety, health
and safety, and environmental matters.
•
Review and update key Group policies on
standards and procedures via the Group Legal
team on an annual basis and engage with
Internal Auditors to provide assurance on
principal and financial risks.
READ MORE
pg 44.
Link to our strategy
UK:
drive returns by
leveraging our UK
number one 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 people, customers,
suppliers and communities
Risk trend
Increased
Decreased
Unchanged
New
(refer to principal risks pg 76, 80)
Link to our strategy
Link to our strategy
Risk trend
•
Employ and audit building and property
management protocols in conjunction with our
property insurers, with regular progress
reporting on recommended site improvements.
•
Implement continuity and disaster recovery
plans at each site to identify and assess key
risks, key controls, improvement actions and
preparedness for an event.
•
Report regularly and proactively on progress
of any identified site improvements or issues
to encourage timely resolution.
•
Detail the procedures to be followed in the
event of different disruption scenarios, auditing
plans biennially with insurance brokers.
•
Support employee engagement in our factories
through site representatives, employee forums
and trade union engagement.
•
Implement governance processes for key
capital investments to ensure project risks are
documented and action plans are implemented
to reduce and mitigate risks.
Due to securing
£130m of interest
rate swaps through
to March 2026
combined with
the external
environment which
indicates that
interest rates have
most likely peaked,
we deem that the
likelihood of this
risk crystallising
has reduced.
80
| Bakkavor Group plc | Annual Report & Accounts 2023
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
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 timeframe 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 timeframe. 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 weaker consumer demand
following recent inflationary pressures that could potentially
lower sales volumes. In addition, raw material, people
and utility costs could increase following macroeconomic
or geopolitical events and these costs would need to
be recovered through price increases agreed with our
customers in order to maintain the Group’s profitability.
These price increases could in turn result in retail price
inflation which could then lead to lower sales volumes.
On 18 March 2020 the Group refinanced existing debt
facilities of £410m with £455m of facilities that mature in
March 2024 on similar terms to those in place under the
previous financing structure. In March 2022 the maturity
of £430m of these facilities was extended to March 2026.
The Group plans to refinance these debt facilities within
the next 12 months. In addition, at the end of 2023 the
Group had £38m of other debt facilities that will be
repaid on an amortising basis by August 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. 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. It would also have significant liquidity
headroom available.
Beyond the three-year timeframe of this viability statement,
the Group would face transitional and physical risks as a
result of climate change. 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.
READ MORE
pg 79.
Having taken account of the sensitivity analysis and
downside scenario modelling, as well as 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 2026.
The Strategic Report was approved by the Group Board and signed on its behalf by:
Mike Edwards
Ben Waldron
Chief Executive Officer
Chief Financial Officer
4 March 2024
4 March 2024
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 2026.
Bakkavor Group plc | Annual Report & Accounts 2023 |
81
Governance
Chairman’s governance overview
84
Corporate governance
compliance statement
86
Group Board
88
Corporate governance report
92
Nomination Committee report
107
ESG Committee report
111
Audit, risk and internal control
114
Audit and Risk Committee report
116
Directors’ remuneration report
124
Directors’ report
147
Statement of Directors’
responsibilities in respect
of the Financial Statements
153
82
| Bakkavor Group plc | Annual Report & Accounts 2023
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
Bakkavor Group plc | Annual Report & Accounts 2023 |
83
CHAIRMAN’S GOVERNANCE OVERVIEW
Chairman’s letter on
corporate governance
The Group Board continues
to take meaningful steps to
further enhance Bakkavor’s
governance framework and
ensure it is making a positive
impact on the business.
Simon Burke
Chairman
On behalf of the Group Board, I present
to you our corporate governance report
for the year ended 30 December 2023.
The 2018 UK Corporate Governance
Code (the “Code”), which is available
on the Financial Reporting Council’s
website (frc.org.uk) continues to be the
standard against which we measure
ourselves. I am pleased to confirm that
the Group has fully complied with the
provisions of the Code for FY23, and this
report sets out how we have applied the
principles as set out in the Code.
We are committed to maintaining a
high standard of governance and
adopting best practice as this
develops, and the Group Board will be
overseeing the implementation of the
newly introduced 2024 UK Corporate
Governance Code. Our strong
governance structures underpin our
strategic priorities which the Group
Board continued to have oversight
of during the year.
READ MORE:
Strategy pg 20.
Group Board’s key activities pg 95.
STRENGTHENING OUR GOVERNANCE
The Group Board approved a revised
governance structure to reflect how
strategic, operational, commercial,
regulatory and risk matters have
been managed and controlled under
Mike Edwards’ leadership.
The Senior Executive Team (“SET”)
(which replaces the Management Board)
meets on a regular basis throughout the
year (on a schedule aligned to the Group
Board meetings) to focus on strategic,
operational, commercial, regulatory
and risk matters. Other senior leaders
in the business (risk, regulatory, finance,
strategy) are invited to the meetings of
the SET from time to time and the
Executive Directors share feedback from
the meetings with the Group Board.
Dear fellow shareholders,
84
| Bakkavor Group plc | Annual Report & Accounts 2023
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
One of Mike’s priorities upon taking the
role of CEO was to develop clear and
focused regional priorities for each of
our distinct businesses, and to this end,
Regional Boards have been set up to
undertake monthly structured reviews
of the business on a regional basis
which supports strategic decision-
making and operational activity in each
region. The focus of these meetings is
operational and commercial matters
affecting the business.
This revised governance structure has
been working effectively and ensures
the Group Board has effective oversight
of all strategic, operational, commercial,
regulatory and risk matters.
CHANGES TO OUR GROUP BOARD
Following Baupost’s sale of its entire
stake in Bakkavor to LongRange
Capital, Patrick Cook, who served on
our Group Board as the representative
of Baupost, stood down on 16 January
2024. Patrick has been a greatly
valued member of the Group Board
and we will miss his input. Bob Berlin
was appointed as the representative
director for LongRange Capital on 16
January 2024. We are welcoming Bob
back to the Group Board, as he served
as Baupost’s representative director
from 2017 to 2019, and we look
forward to working with him again.
GROUP BOARD AND COMMITTEES’
PERFORMANCE REVIEW
This year, our Group Board and
Committee performance review
was externally facilitated by Clare
Chalmers Ltd (“Clare Chalmers”),
who also undertook the last
independent review of the Group
Board three years ago.
Clare Chalmers’ evaluation report
was robust and informative and
provided a valuable independent
external perspective on the Group’s
governance. Clare Chalmers noted that
Bakkavor’s Group Board had in the last
18 months undergone a considerable
transformation. In particular, the
owner-CEO had become a Non-
executive Director, a new CEO had been
appointed and three new independent
Non-executive Directors had been
recruited. These changes have had a
positive impact on the quality of
governance provided by the Group
Board, robust conversations were
taking place, and the Non-executive
Directors were able to provide the right
balance of challenge and support.
As well as refreshing the Group
Board, significant steps had been
taken to address the areas suggested
for improvement in the 2020 report.
Clare Chalmers acknowledged the
challenges the business and the
sector as a whole had been through,
such as Covid, inflationary pressures
and supply chain issues. In addressing
these challenges, the Group Board
continues to be able to draw on some
considerable strengths.
Clare Chalmers made a number of
recommendations which were discussed
at the Group Board and Committee
meetings, and actions agreed.
READ MORE
pg 106.
OUR STAKEHOLDERS
The Group Board is responsible for
leading stakeholder engagement in line
with Section 172 of the Companies Act
2006 (“Section 172”). I have sought to
engage with our investors, and have had
the opportunity in the last year to meet
up and discuss with major shareholders
of the Company, including a major
institutional shareholder, about the
performance of the business.
Sanjeevan Bala was appointed as our
designated workforce engagement
Non-executive Director effective
from 1 January 2023. Sanjeevan has
significant stakeholder engagement
experience gained from his career
across a range of sectors and as a
member of the Remuneration
THE UK CORPORATE GOVERNANCE CODE: COMPLIANCE STATEMENT
The Group Board is pleased to report that the Company has applied
the principles and complied with the provisions of the UK Corporate
Governance Code (the “Code”) for the period ended 30 December 2023.
A copy of the Code, issued by the Financial Reporting Council, can be
found at frc.org.uk.
Committee, it was thought he would
be well-placed to take on the role.
Sanjeevan visited sites and attended
two Group Employee Forums (“GEF”),
providing the Group Board with updates
on the topics raised by our colleagues.
The Group Board attended a site
visit to Bakkavor Bread Crewe when,
as part of our tour, we had the
opportunity to meet both members
of local management and workers.
READ MORE:
Stakeholder engagement pg 64.
Governance in action pg 99.
AGM
I am pleased to confirm that this
year’s Annual General Meeting
(“AGM”) will be in person. The Group
Board considers the AGM to be an
important opportunity to engage
with our shareholders. The 2020
Directors’ Remuneration Policy has
reached the end of its three-year life
and a new policy will be put forward
for a shareholder vote at the AGM.
READ MORE
pg 151.
LOOKING AHEAD
The governance priorities for 2024
include continued stakeholder
engagement and taking steps to
implement the recommendations
from the external Group Board and
Committees’ performance review,
as well as the adoption of the newly
introduced 2024 UK Corporate
Governance Code. We will also be
focused on monitoring progress
against our sustainability targets.
Simon Burke
Chairman
4 March 2024
Bakkavor Group plc | Annual Report & Accounts 2023 |
85
CORPORATE GOVERNANCE COMPLIANCE STATEMENT
Section 1: Board leadership and company purpose
pg 87
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 Bakkavor 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 letter on corporate
governance
84
•
Strategic Report
2
•
Section 172 statement and the
Group Board’s engagement with
key stakeholders
64
•
Purpose, values and culture
93
•
Group Board’s key activities
95
Section 2: division of responsibilities
pg 101
Code principles:
F. Leadership of Board by Chair.
G. Board composition and responsibilities.
H. Role of Non-executive Directors.
I.
Company Secretary, policies, processes, information,
time and resources.
•
Group Board composition
103
•
Roles and responsibilities
101
•
Time commitment, external
appointments, independence
and tenure
102
Section 3: composition, succession and evaluation
pg 103
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
103
•
Nomination
Committee report
107
•
Inclusion and Diversity
110
•
Group Board, Committee and Director
performance evaluation
106
Section 4: audit, risk and internal controls
pg 114
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
116
•
Risk management
72
•
Fair, balanced and
understandable assessment
119
•
Going concern
152
•
Viability statement
81
Section 5: remuneration
pg 124
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
124
THIS REPORT’S KEY FEATURES
This governance statement, which includes the reports of the Nomination, ESG, Audit and Risk, and Remuneration
Committees, explains how we have applied the principles and complied with the provisions of the Code.
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STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
•
The Regional Boards undertake monthly structured reviews of the business on a regional basis which supports
strategic decision-making and supports operational activity in each region.
•
The focus of these meetings are operational and commercial matters affecting the business.
•
The Executive Directors share feedback from the Regional Boards with the Group Board.
•
The SET meets on a regular basis throughout the year (on a schedule aligned to the Group Board meetings) to focus
on strategic, operational, commercial, regulatory and risk matters.
•
The SET comprises the Group CEO and Group CFO and CEO Asia (the Executive Directors) and the Group Chief
People Officer (“CPO”), UK Managing Director (“MD”) Meals, UK MD Bakery, UK Finance Director and US COO.
•
Other senior leaders in the business (risk, regulatory, finance, strategy) are invited to the meetings of the SET from
time to time.
•
The Executive Directors share feedback from the SET meetings with the Group Board.
•
Collectively responsible for promoting the long-term sustainable success of the Group for the benefit of our
stakeholders: employees, customers, suppliers, investors and communities.
•
Lead and direct the Group by setting the purpose and strategy of the Group, overseeing management and monitoring
and assessing culture.
BOARD OF DIRECTORS (GROUP BOARD)
NON-EXECUTIVE DIRECTORS AND EXECUTIVE DIRECTORS
SENIOR EXECUTIVE TEAM (“SET”)
Section 1:
Board leadership and
company purpose
•
The Board Committees assist the Group Board in the fulfilment of its duties and responsibilities.
•
Oversee activities within each Committee’s Terms of Reference.
•
Report to the Group Board via the Committee Chairs on the matters discussed at Committee meetings.
Nomination Committee
Remuneration Committee
ESG Committee
Audit and Risk Committee
REGIONAL BOARDS
UK operations
UK customers
US
China
Our governance framework
Bakkavor Group plc | Annual Report & Accounts 2023 |
87
GROUP BOARD
Meet our
Group Board
Skills and experience:
Simon is a Chartered Accountant
with extensive experience within the retail and food
sectors. Following multiple high-profile CEO positions,
Simon completed the successful restructure and sale of
Hamleys plc between 1999 and 2003, as its Chairman and
Chief Executive. Since then, he has specialised in value
creation roles for both quoted and private equity-backed
businesses, acting as chair for many consumer
businesses, including Majestic Wine, Mitchells & Butlers,
Bathstore.com and Superquinn.
Appointment:
Simon has served as a Non-executive
Director of Bakkavor since February 2017 and was
appointed as Chairman in October 2017.
External appointments:
Chairman of The Light Cinemas
(Holdings) Limited; Chairman of Blue Diamond Limited;
and an Independent Non-executive Director of Camelot UK
Lotteries Limited.
SIMON BURKE
Non-executive Chairman
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 in 2011, 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. Ben holds a Bachelor
of Science degree from the University of Birmingham.
Appointment:
Ben joined Bakkavor in 2011 as Group
Financial Controller. He has served as Chief Financial
Officer and Executive Director since December 2020,
and his role expanded with the appointment as Asia CEO
effective from December 2022.
External appointments:
none.
BEN WALDRON
Chief Financial Officer
and Asia CEO
Group Board ESG Sponsor
Skills and experience:
Mike started working in Fresh
Prepared Foods in 1989 as a graduate at United Biscuits
(subsequently acquired by Heinz) before joining Bakkavor
in 2001. Mike started his career in HR before quickly
moving onto operations and then general management.
Appointment:
Mike joined Bakkavor in 2001, was
appointed Chief Operating Officer in 2014, joined the Board
in 2020 and became Chief Executive Officer in 2022.
External appointments:
none.
MIKE EDWARDS
Chief Executive Officer
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GOVERNANCE
FINANCIAL STATEMENTS
Group Board Committees
Audit and Risk
Committee pg 116
Nomination
Committee pg 107
Remuneration
Committee pg 124
ESG Committee
pg 111
Committee
Chair
Skills and experience:
Sanjeevan is a multi-award-winning
data and analytics professional who has operated across a
range of sectors and brings expertise in digital transformation,
data and AI science, innovation, and culture. He has a proven
track record of driving customer-centric business
transformations through the strategic use of data, resulting
in EBIT and revenue growth. 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.
Appointment:
Sanjeevan has served as a Non-executive
Director of Bakkavor since August 2021.
External appointments:
Sanjeevan is Group Chief Data
& AI Officer at ITV plc.
SANJEEVAN BALA
Independent,
Non-executive Director
Designated workforce
engagement
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.
She spent 25 years at PepsiCo Inc in both commercial and
functional roles, also serving as 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 from 2012 to 2020 was a Future
Council Member of the World Economic Forum. She holds
an MBA and Bachelor of Science degree in Industrial
Engineering from Bogazici University in Istanbul.
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 BIS Çözüm.
UMRAN BEBA
Independent,
Non-executive Director
Designated Non-executive
Director for ESG matters
Skills and experience:
Jill has extensive sales, marketing and
general management experience across a number of blue-chip
companies in the food and beverage sector including Mars,
PepsiCo and Premier Foods. Jill brings deep understanding of the
food industry, and has been involved in turnaround and growth
situations in a range of branded and own label businesses.
Appointment:
Jill has served as a Non-executive Director
of Bakkavor since March 2021.
External appointments:
Jill is a Non-executive Director,
Remuneration Committee Chair, and Audit/Nomination/ESG
Committee member of Bellway plc and Halfords Group plc.
She is a Senior Independent Director of Halfords Group plc,
and Non-executive Director, Remuneration and Audit
Committee member of C&C Group plc. Jill is also Senior
Independent Director, Remuneration Committee Chair and a
member of the Audit/Nomination Committees of St. Austell
Brewery Company Limited.
JILL CASEBERRY
Independent,
Non-executive Director
Senior Independent Director
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GROUP BOARD
CONTINUED
Group Board Committees
Audit and Risk
Committee pg 116
Nomination
Committee pg 107
Remuneration
Committee pg 124
ESG Committee
pg 111
Committee
Chair
Skills and experience:
Lydur has unique expertise and
insight into the Company’s business as a founder of
Bakkavor. He received his education from the Commercial
College of Iceland.
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:
none.
LYDUR GUDMUNDSSON
Non-independent,
Non-executive Director
Skills and experience:
Agust received his education
from the College of Ármúli in Reykjavik, Iceland.
Appointment:
Agust is one of the founders of Bakkavor
and has served as Non-executive Director of Bakkavor
since November 2022. He served as Executive Chairman
of Bakkavor from 1986 through to May 2006, and served
as Chief Executive Officer from 2006 through to
November 2022.
External appointments:
none.
AGUST GUDMUNDSSON
Non-independent,
Non-executive Director
Skills and experience:
Bob is a senior investment
professional with strategic operating experience across
the consumer goods, food, manufacturing, technology and
services sectors. From 2008 to 2018, Bob was principally
responsible for private equity investments at the Baupost
Group, aggregating more than $5B in total enterprise
value. Bob received a Bachelor of Science degree with
Honors from Washington and Lee University.
Appointment:
Bob has served as a Non-executive Director
of Bakkavor since January 2024.
External appointments:
Bob is the Founder and Managing
Partner of LongRange Capital L.P. and a Director of BL
Memorial Holdings, L.L.C.
ROBERT (BOB) BERLIN
Non-independent,
Non-executive Director
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GOVERNANCE
FINANCIAL STATEMENTS
Skills and experience:
Jane spent 25 years with Deloitte
where she advised multinational companies, including
businesses in the transport, leisure, consumer and
technology sectors. Since 2012 she has served as a
Non-executive Director and Audit Committee Chair at
several UK public companies in a range of sectors. In
addition to broad international experience in a range of
sectors, Jane brings substantial audit, risk and audit
committee expertise to the Board.
Appointment:
Jane has served as a Non-executive
Director of Bakkavor since April 2018.
External appointments:
Jane is currently a Non-executive
Director and Chair of the Audit Committees of FirstGroup
plc and TI Fluid Systems plc, and a Non-executive Director
and Chair of the Remuneration Committee of Glanbia plc.
JANE LODGE
Independent,
Non-executive Director
Skills and experience:
Annabel has held senior legal
positions in several companies, including Britvic plc and
Ladbrokes plc. She was the Group General Counsel and an
Executive Committee member at Ladbrokes plc. Annabel
began her career in private practice, at the multinational
law firm SJ Berwin LLP, in London. 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) and an
alumna of London Business School.
Appointment:
Annabel joined Bakkavor as Group General
Counsel and Company Secretary in June 2019.
External appointments:
Annabel is currently a Non-
executive Director of Edinburgh Investment Trust plc.
ANNABEL TAGOE-
BANNERMAN
Group General Counsel
and Company Secretary
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. In 2011 Denis
was appointed Chairman and CEO of Accor, where he was
responsible for an estate spread across over 90 countries,
leaving in 2013 to pursue an advisory and portfolio career.
Appointment:
Denis has served as a Non-executive Director
of Bakkavor since February 2017.
External appointments:
Denis is currently a Non-executive
Director of Eurostar International Limited, JDE Peet’s, Elior and
Expresso House. He is also Vice-Chairman of Pret A Manger,
Chairman of Kellydeli, and a founding partner of investment
fund French Food Capital.
DENIS HENNEQUIN
Independent,
Non-executive Director
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91
CORPORATE GOVERNANCE REPORT
Board leadership and
Company purpose
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 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 considers 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 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 and disposals,
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 which was updated in
November 2022. This is available for
review on our website (bakkavor.com/
en/investors/governance).
The Group Board challenges strategy, performance and the responsibility
of management to align our purpose, values, strategy and culture; promote
the long-term success of the Group; and create value for all stakeholders.
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GOVERNANCE
FINANCIAL STATEMENTS
OUR PURPOSE
To lead the way through flawless execution and by living our
values. To delight customers and consumers through fresh,
convenient and great-tasting food that we create every day.
OUR CULTURE
To empower and support all our stakeholders by living our values.
Respect and trust
each other
Working together, being
open and honest with each
other and ensuring that we
treat all colleagues with
equal respect. They are
people-focused and the
foundation of our culture,
guide our behaviours and
reflect who we are today
and aspire to be tomorrow.
Keep the customer at
the heart of what we do
Our customers and
suppliers remain at the heart
of what we do as we value and
protect our 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.
Get it right,
keep it right
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.
Be proud of
what we do
We are proud of what
we do, inspire others to
work with passion and
enthusiasm, and look
for ways to improve the
way we work.
PURPOSE AND CULTURE
The Group Board sets the Group’s purpose and assesses its culture. Both are key to strengthening the Group’s impact
among its stakeholders and are supported by the Group’s values and strategy.
ASSESSING OUR CULTURE
All Directors act with integrity and
lead by example to promote the
desired culture: to empower and
support our stakeholders by living
our values. The Group Board is
responsible for assessing the Group’s
culture, ensuring it is closely aligned
with our strategic priorities which are
underpinned by our focus on
operational excellence and being a
responsible, caring and Trusted
Partner for all our stakeholders.
The Group Board receives updates
from the Chief People Officer (“CPO”)
and the designated workforce
engagement Non-executive Director
on colleague engagement through the
annual Employee Engagement Survey
(“EES”) and the Site and Group
Employee Forums. We identified four
areas of focus following the 2022 EES:
responding to change effectively and
embracing new ways of doing things;
providing opportunities for personal
growth and development; embedding
our values; and providing relevant
colleague benefits. Our 2023 EES
showed a significant improvement
in the proportion of people willing
to recommend Bakkavor as a great
place to work, with score trends
generally moving upwards with great
improvements in understanding our
values; our ESG (Environmental, Social
and Governance) strategy; and what
our Site Employee Forums do and how
they can help. Management responded
to feedback from the 2023 survey
which was completed in September
2023 and have identified the key areas
to focus efforts on throughout 2024.
READ MORE:
Our people pg 30.
Group Board’s key activities pg 95
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93
CORPORATE GOVERNANCE REPORT
CONTINUED
MONITORING OUR CULTURE
Throughout the year, the Group Board
monitored the Group’s culture and
how our colleagues’ feedback was
being implemented, receiving regular
updates from the CPO and updates
from the designated workforce
engagement Non-executive Director
on the role of Bakkavor’s Site
Employee Forums (“SEF”) and
feedback sessions held with
Bakkavor’s Group Employee Forum
(“GEF”). The Group Board reviewed
the suggestions made during the
feedback sessions on the involvement
of the SEF in staff pay negotiations,
site conditions and extending the
variety of products available for
colleagues at our staff shops. The
Group Board recognises that the
role of the SEF at sites is vital and
provides an open and transparent
communication forum, where
employees can air their views and
contribute to the wider Group
operational decision-making process.
For further information on how the
Group Board monitored the culture of
the Company during the year, please
see the Group Board activities section.
READ MORE
pg 96.
GROUP BOARD COMMITTEES
The Group Board has four Committees:
the Audit and Risk Committee, the ESG
Committee, the Nomination Committee
and the Remuneration Committee.
All four Committees comprise only
Non-executive Directors and each
Committee has agreed Terms of
Reference which are available on our
website (bakkavor.com/en/investors/
governance).
The Group Board also has a Disclosure
Committee which comprises the
Chairman, the CEO, CFO and Asia CEO
and Group General Counsel and
Company Secretary. The Disclosure
Committee has oversight of the
Company’s regulatory compliance
with its disclosure obligations under
the Market Abuse Regulation.
These Committees assist with the
detailed oversight of Bakkavor’s
financial reporting, disclosure
obligations, risk management,
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 the Group Board, Senior
Executive Team (“SET”) and senior
leadership positions.
SENIOR EXECUTIVE TEAM
The SET meets on a regular basis
throughout the year (on a schedule
aligned to the Group Board meetings)
to focus on strategic, operational,
commercial, regulatory and risk
matters and comprises the CEO
and CFO (together, “the Executive
Directors”) and the CPO, UK Managing
Director (“MD”) Meals, UK MD Bakery,
UK Finance Director, and US Chief
Operating Officer.
Other senior leaders in the business
(risk, regulatory, finance, strategy)
are invited to the meetings of the SET
from time to time. The Executive
Directors share feedback from the
SET meetings with the Group Board.
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 disclosed and 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 company law
and the Company’s Articles of
Association, at each Group Board
meeting, Directors declare any
conflicts of interest in respect of the
agenda items for the meeting and
the Group Board is permitted to
authorise potential conflicts that may
arise and to impose such conditions
or limitations as it deems 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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GOVERNANCE
FINANCIAL STATEMENTS
Key activities
in 2023
Board meetings are an important mechanism through which the Directors fulfil
their duties, particularly under Section 172 of the Companies Act 2006.
Here we describe the Group Board’s
activities during 2023. Whilst not
an exhaustive list, it provides an
indication of the factors affecting our
stakeholders which we consider in
Board discussions. The Group Board
discharges its responsibilities under
Section 172 of the Companies Act 2006.
It also considers our stakeholders
in its decision-making.
READ MORE
pg 64.
For each Group Board and Committee
meeting, a tailored agenda is agreed
beforehand by the Chairman,
Committee Chair, CFO (as appropriate),
and Group General Counsel and
Company Secretary.
A typical meeting will comprise
reports from the CEO and the CFO,
as well as regional reports (US and
China) on current trading and
financial performance. There is
also a report from the CPO at each
Group Board meeting, reviewing
the colleague engagement plan,
Company values and culture as well
as the employer brand. Furthermore,
there will be two or three deep-dives
into areas of strategic importance.
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.
OUR KEY STAKEHOLDERS
Investors
Colleagues
Customers
Suppliers
Communities
STRATEGY AND COMPANY PERFORMANCE
The CEO and CFO led discussions focusing on recent
trading, general business performance and the key
strategic initiatives underway:
GROUP
•
Oversight and challenge of management’s implementation
of the Group strategy, enabling the Group to protect
profits against sustained headwinds throughout 2023.
READ MORE
pg 10.
UK
•
Received updates on UK trading performance.
•
Discussed the offset of inbound inflation through
contractual pass-through mechanisms, conventional
pricing negotiations and self-help measures, value
optimisation and tight cost control.
•
Discussed commercial landscape and competitor
environment across the UK business.
•
Discussed and approved investments in automation as well
as capacity and capability investment to accommodate
business wins.
READ MORE
pg 99.
•
Discussed the relaunch of our retail offer for our
main licensed brand and the expansion of the range
of our Delicious Desserts Company offer, now the
fifth largest brand in the chilled desserts category.
US
•
Refocused from growth to profit, overseeing
completion of a cost base review, delisting margin-
dilutive products and implementing tangible
performance improvement plans at each site.
•
Discussed ways to strengthen the leadership team
in operations and commercial, supported by internal
transfers and secondments from the UK.
•
Reconfirmed our USP and our approach to customers.
•
Approved the launch of a first-to-market sharing
bread at a pre-eminent national retailer.
CHINA
•
Agreed forward-looking strategic priorities with a
focus on developing our presence in the retail channel.
•
Approved the sale of our minority stakes in the bakery
businesses La Rose Noire Limited and Patisserie et
Chocolat Limited.
•
Discussed methods for reducing operating losses to
offset low factory utilisation levels, poor crop yields
and wage inflation.
•
Looked at strengthening relationships with our
existing customers through new product development
and expansion of our core offering.
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95
CORPORATE GOVERNANCE REPORT
CONTINUED
CULTURE
•
Reviewed colleague feedback from our 2023 Employee
Engagement Survey (“EES”) and approved the areas of
focus for 2024.
•
Received updates from Sanjeevan Bala, designated
workforce engagement Non-executive Director, and
the CPO on feedback sessions with the SEF and GEF.
READ MORE
pg 100.
•
Oversaw the Wellbeing strategy which involves three core
pillars of physical, emotional and financial wellbeing,
which the Group Board considers critical during this time
of increased inflation and the cost of living crisis.
•
Received updates on embedding our values and
development of in-house workshop ‘Better Behaviours,
Better Bakkavor’.
•
Approved launch of Bakkavor-branded discounted
food offering to all UK employees in response to
colleague feedback from the EES on how to make
Bakkavor a better place to work.
•
Approved enhanced leadership training with a
foundation programme planned for 2024.
•
Approved investment in award-winning apprenticeship
and graduate programmes.
READ MORE
pg 30.
FINANCIAL UPDATES
•
Reviewed financial KPIs and non-financial KPIs.
•
Approved an interim dividend of 2.91 pence per
Ordinary share on 13 October 2023 to shareholders
and agreed to propose a final dividend of 4.37 pence
per Ordinary share at the AGM on 23 May 2024.
•
Discussed the balance sheet strategy, capital
efficiency and the 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 2024 budget, including material capital
expenditure projects.
•
Considered and approved the Group Tax Strategy
and Policy and 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.
•
Approved the reappointment of PriceWaterhouseCoopers
LLP (“PwC”) as the Company’s External Auditors
subject to shareholder approval at the 2024 AGM.
•
Oversaw a disciplined approach to, and the
implementation of, the capital allocation framework
to enhance shareholder value.
READ MORE
pg 68.
GOVERNANCE AND LEGAL
•
Approved the revised governance structure.
READ MORE
pg 87.
•
Undertook an external performance review of the
Group Board and Committees and considered the
output and recommendations.
READ MORE
pg 104.
•
Approved the termination of the relationship agreement with
the Baupost Group, which resulted in Patrick Cook, Baupost’s
representative to the Group Board, stepping down.
•
Approved the entry into the relationship agreement with
LongRange Capital and the appointment of Bob Berlin as
a non-independent Non-executive Director of the Group
Board, as LongRange Capital’s representative.
•
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 which can be viewed on the Bakkavor
website (bakkavor.com/en/esg/policies-and-documents).
•
Reviewed and approved the Schedule of Matters Reserved
for the Board. This can be viewed on the Bakkavor website
(bakkavor.com/en/investors/governance/).
•
Received regular updates on whistleblowing and
approved the Group’s Whistleblowing Policy.
•
Received governance updates and ongoing training
on relevant matters throughout the year.
READ MORE
pg 107.
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STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
TECHNICAL RISK MANAGEMENT AND MITIGATION – HEALTH AND SAFETY AND FOOD SAFETY
•
Received regular updates on health and safety, food
safety, food integrity and environmental compliance.
•
Discussed the Technical strategy led by the Central
Technical team and progress made to standardise
health and safety and food safety across the business.
•
Discussed Bakkavor’s approach to allergen
management, listeria and hygiene.
•
Approved the technical priorities for 2024.
INVESTOR ENGAGEMENT
•
Received regular updates on Bakkavor’s share price
performance, analyst consensus, ratings and target
prices, and summary of listed peer results.
•
Received, reviewed and discussed draft financial
results statements and accompanying presentations.
•
Received investor feedback post roadshows and
meetings, included in the Group Board pack, and in
discussion with the CFO and the Company’s brokers.
Key areas of focus: inflation and supply chain impact,
volumes and consumer behaviours, capital allocation
approach (leverage, dividend and capital expenditure)
and outlook on US and China regions.
•
Reviewed investor relations calendar, including
consideration of quarterly trading updates.
•
Chairman actively seeks to engage with shareholders.
Senior Independent Director and Committee Chairs
available for direct meetings where required.
READ MORE
pg 64.
RISK
•
Reviewed the Group’s principal risks and agreed the
Group risk appetite for each of the principal risks.
•
Approved the reduction of principal risks from 15 down
to 10, and noted the reduction reflects the current risk
environment and allows us to increase our focus on
the key risks to the business.
•
Received technical updates at each meeting from the
UK, US and China across health and safety, food safety
and whistleblowing.
•
Considered risk appetite in connection with major
capital proposals and transformation projects
(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.
•
Assessed the impact of cyber risk.
•
Oversight of potential options for changing our UK ERP
system. Received regular updates from the Audit and
Risk Committee Chair on the activities of the Audit and
Risk Committee during the full-year 2023.
READ MORE
pg 72.
ESG
•
Received updates from the ESG Committee, designated
Non-executive Director for ESG matters and the Group
Board ESG Sponsor on the execution of the Trusted
Partner ESG strategy and performance against non-
financial KPIs: UK food waste, UK accidents, Group net
carbon emissions and UK employee turnover.
•
Discussed UK food waste reduction and reviewed
the roll-out of a waste tracking and elimination
project to identify reduction opportunities as part
of our Operational Excellence programme.
•
Received a dedicated training session from external
advisers, focusing on developing ESG regulation,
including climate disclosures.
•
Reviewed and considered the Group’s community initiatives,
how we are delivering these and our progress in doing so.
•
Received updates on Task Force on Climate-related
Financial Disclosures (“TCFD”) requirements and
reviewed overall outcomes of climate risk assessment.
•
Approved proposed science-based targets for submission
to the Science Based Targets initiative (“SBTi”) and
climate-linked remuneration incentives as recommended
by the ESG Committee and the Remuneration Committee.
•
Discussed the progress of our climate transition plan
to meet the commitment to Net Zero by 2040.
READ MORE
pg 111.
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CORPORATE GOVERNANCE REPORT
CONTINUED
REMUNERATION
•
Determined and agreed with the Remuneration
Committee the arrangements for the Chairman,
Executive Directors and SET.
•
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 2023 including changes to the
Group’s Remuneration Policy.
•
Agreed with the Remuneration Committee’s
recommendation to introduce UK food waste as
an additional ESG measure to the STIP, reflecting
colleagues’ desire to incorporate ESG metrics
in future Executive Rewards. This is alongside
employee turnover and in line with our ESG targets.
READ MORE
pg 124.
CUSTOMERS AND SUPPLIERS
•
Collaborated with customers to manage input cost inflation
through value optimisation and efficiency initiatives.
•
Updated on pricing model discussions with customers
and suppliers to enable price increases, helping
to mitigate inflation impact, share deflation in raw
materials and other input costs.
•
Updated on engagement with suppliers on sourcing raw
materials and the early identification of potential issues.
•
Considered UK market insights updates to understand how
they inform category plans and new product pipelines.
•
Approved comprehensive range reviews across
selected customers and categories to improve value
and quality.
•
Reviewed latest developments and growth opportunities
in the US and China, with measures taken to broaden
and strengthen existing customer partnerships.
•
Discussed impact of energy inflation and approach
to hedging.
•
Updated by Procurement Director on centralised
category procurement structure, and Bakkavor
Inbound Logistics (“BIL”).
•
Discussed the work of the Operational Excellence
team through a dedicated session covering detailed
performance initiatives to drive labour efficiencies
and reduce UK food waste.
•
Updated on our Responsible Sourcing strategy,
commitments and progress.
•
Agreed to incorporate climate risk understanding into
raw material sourcing to build further resilience in our
inbound supply chain.
•
Approved additional requirements around
environmental action in our Supplier Code of Conduct.
READ MORE
pg 64.
GROUP IT STRATEGY
•
Reviewed Group IT objectives, strategy and tactics to
deliver business trust, value and security resilience.
•
Monitored the progress made against the 2023 Group
IT priorities.
•
Reviewed the status of the UK cyber programme
and Group IT international programme.
•
Received updates on exploring potential options
for upgrading our UK ERP system. During 2023
we were in the discovery phase of this project.
KEY PRIORITIES FOR THE GROUP BOARD IN 2024
• Continuing to foster relationships and engaging
with stakeholders, including colleagues, customers,
suppliers, investors and communities.
• Engaging with capital markets to drive share price
performance.
• Reviewing strategy and plan to target new business
wins with competitive pricing and product innovation.
• Further strengthening our talent pipeline
and leadership development offer.
• Focusing on the ESG framework and its
implementation, including implementation of
our science-based targets in the near-term.
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STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
Governance in action:
Board visit to Crewe
BACKGROUND
In January 2022, the Group Board
approved a significant capital
investment of £10m in our Crewe
Bread site. This enabled us to
enhance our operations, improving
productivity, capacity and efficiency
to underpin our Group strategy.
A new automated flatbread production
line was introduced, installing a fourth
flatbread line, which automated
pinning and end-of-line packing,
providing labour-saving and quality
improvement benefits. As part of the
investment, a low-carbon, energy-
efficient chilling system was also
introduced at Crewe, replacing
nitrogen chilling and resulting in
cost-saving and carbon offset.
Following completion of the
investment, the Group Board visited the
site in June 2023. It completed a site
tour and received presentations from
the Managing Director of Bakkavor
Bakery and the UK Finance Director,
which focused on improvements to
operational efficiencies as well as the
financial benefits delivered.
SECTION 172 FACTORS
CONSIDERED
Prior to approval, the Group Board
considered how the investment would
promote the long-term success of the
Group through the creation and
delivery of sustainable stakeholder
value, and, in doing so, considered the
needs of all relevant stakeholders,
including customers, suppliers
and colleagues.
LONG-TERM CONSEQUENCES OF
THE DECISION
The Crewe site has delivered in line
with expectations, whilst operational
efficiency has improved and the
site is well-placed to capitalise on
future opportunities, with headroom
for growth.
FOSTERING RELATIONSHIPS WITH
CUSTOMERS AND SUPPLIERS
For our customers, it is imperative
we maintain our high levels of service
and continue to deliver quality
products. The high-speed, high-
capacity automated flatbread
production line has enabled us to
increase volume and introduce cost
savings for our customers. We also
worked collaboratively with our
suppliers to ensure the on-time and
on-budget delivery of this project.
INTERESTS OF OUR COLLEAGUES
Working with the Site Employee
Forums (“SEF”) to share details of the
project, from concept stage through to
launch, enabled us to gain feedback to
ensure that the project was positively
received and colleagues understood
the benefits. Topics included health
and safety, product quality and
increased capacity that would
underpin the future of the Crewe site.
IMPACT ON THE COMMUNITY
AND ENVIRONMENT
The replacement of nitrogen chilling
with a low-carbon, energy-efficient
system has helped to contribute to a
reduction in our gross (location-based)
and net (market-based) carbon
footprint. The automation of end-of-
line packing has reduced surplus,
and a factory and waste reduction
programme is in place. Surplus
products are sold in our staff shop, in
line with the waste reduction initiatives
we have at all our Group sites.
ACTING FAIRLY BETWEEN
SHAREHOLDERS
The Group Board believes the plan is
in the interests of all shareholders.
The investment was return-enhancing
and delivered in line with the plan. It
also creates more opportunities for
further business wins, and financial
performance at the site has improved.
MAINTAINING OUR REPUTATION
FOR HIGH STANDARDS OF
BUSINESS CONDUCT
The customers of our flatbread
offering have trust and confidence
in our capacity for future delivery,
making us ideally placed for future
growth opportunities. In addition,
the improvement in product quality
has been positively received by our
customers, which is reflected in
their consumer online reviews.
Overall, the investment at Crewe
has had a positive impact on the
business. We reshaped the
relationships with our stakeholders
whilst also creating capacity for
further growth and improving the
financial performance of the site.
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CORPORATE GOVERNANCE REPORT
CONTINUED
Since his appointment as designated
workforce engagement Non-
executive Director, Sanjeevan Bala
gives an insight into colleague
engagement at Bakkavor:
Q
What does ‘a day in the life’
of your role look like?
I engage with colleagues through
sessions with the Group Employee
Forum (“GEF”) and on visits to sites,
before reporting the key headlines
back to the Group Board. I really
enjoy the opportunity to understand
our colleagues’ interests and ensure
they are considered in the Group
Board’s decision-making.
Q
Can you tell us about your
career so far?
I started in strategy consulting,
advising both B2C and B2B
businesses on customer centricity.
I then moved into scale-ups and
start-ups in Silicon Valley, and then
to various client-side roles in digital
transformations. I spent several
years at Dunnhumby, which
pioneered the Tesco Clubcard
programme. Currently, I’m the Group
Chief Data and AI Officer at ITV plc
and AI Adviser for Gartner, Data IQ
and IPQC, where I lead and influence
the industry on the value creation
opportunities, risks and future
impact associated with deploying
AI at scale. My experience spans
sectors including media, retail,
financial services, e-commerce,
telecoms and pharmaceuticals.
Q
Why do you consider Bakkavor’s
Group Employee Forum (“GEF”)
and Site Employee Forums
(“SEF”) important?
We have a highly diverse workforce with
multiple nationalities at our sites, so it is
key that all their voices are heard. There
is a balance between Group-based and
local site initiatives, which we feel is
critical to our continued success and
growth. Our SEF are an excellent way of
empowering colleagues to deliver their
best. They are a key link in how we
execute and calibrate our strategy. Our
people are our greatest asset and the
forums keep them front and centre
of our operations as a business.
Q
What did you discuss at the
GEF sessions you attended?
We updated our colleagues on our
people plan for 2023 in response to
colleague feedback from the 2022
Employee Engagement Survey (“EES”).
We held sessions on the involvement of
the SEF in staff pay negotiations, site
conditions and extending the variety of
products available for colleagues at our
staff shops. We received updates on
Bakkavor’s wellbeing activities, with a
particular focus and commitment on
mental health.
I presented to the GEF to explain
Executive Reward at Bakkavor and
enhanced transparency around pay
and benefits. This allows us to
discuss the alignment of executive
with wider colleague remuneration.
We captured a desire from colleagues
to incorporate ESG metrics into future
Executive Rewards, which I fed back
to both the Remuneration and ESG
Committees.
Q
How important is it for the
voice of colleagues to be heard
in the boardroom?
I strive to ensure that colleagues’ trust
is maintained in the Group’s SET and
senior leaders. Directly engaging with
colleagues promotes a culture of
openness, inclusivity and transparency.
Q
What have been your 2023
highlights in your new role?
I really enjoyed joining Donna-Maria
Lee, our Chief People Officer, on site
visits and attending the two GEF
sessions where I met many colleagues
from different sites and functions.
I complemented this with three
additional site visits. Something
I consistently observed was the
passion, care and desire to improve,
which is deeply embedded in the SEF
leadership. They develop deep ties
with the site workforce alongside links
with the local community. We have a
very loyal and committed workforce,
with over 1,000 colleagues celebrating
ten years at Bakkavor. At Holbeach,
we explored how the localisation of
SEF budgets had made a material
change in SEF effectiveness,
developing ownership and
opportunities for further engagement.
Q
What are your key priorities
for 2024?
I plan to attend further GEF sessions
and sites throughout the year to hear
how the 2023 EES is shaping our focus
for 2024, so that colleagues’ views,
concerns and ideas remain a feature
of our Group Board discussions.
Sanjeevan Bala
Non-executive Director
Governance in action:
Colleague engagement
WITH
SANJEEVAN BALA
Q&A
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GOVERNANCE
FINANCIAL STATEMENTS
Section 2:
Division of responsibilities
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 the effective contribution
of all Non-executive Directors who provide constructive challenge and hold management to account.
KEY ROLES AND RESPONSIBILITIES
Non-executive
Chairman
Simon Burke
The Chairman leads the Group Board. His leadership style fosters a culture of openness, active participation,
dialogue and debate at the Board-level. This promotes cohesion on the Group Board. He facilitates the right
conditions to ensure effectiveness in all aspects of the role of the Group Board and its Committees.
Working with the CEO and the Group General Counsel and Company Secretary, the Chairman sets the
agenda for the Group Board meetings, taking cognisance of Group Board members’ priorities. He ensures
that Group Board papers are made available to all Directors in good time before meetings and allows
sufficient time for robust and constructive discussions at meetings. He encourages and facilitates active
engagement by all Directors, drawing on their skills, knowledge and experience. Each Director contributes
and constructively reviews management’s updates and requests, thereby holding management accountable.
The Chairman promotes effective communication between the Group Board, Senior Executives,
shareholders and other key stakeholders. Through regular investor relations updates and investor
engagement feedback, the Chairman ensures that the Group Board, as a whole, has a clear understanding
of investors’ views, and how those views have influenced the Group Board’s decisions.
He maintains close working relationships with the CEO 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.
CEO
Mike Edwards
The CEO has specific responsibility for recommending the Group’s strategy to the Group Board, for the
execution of strategy once approved and for overseeing the day-to-day running of the business. In
undertaking such responsibilities, the CEO is supported by the Senior Executive Team. Together with the
CFO and Asia CEO, the CEO monitors the Group’s operational efficiency and financial performance as he
directs the daily 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.
CFO
Ben Waldron
The CFO is an Executive Director and 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.
Bakkavor Group plc | Annual Report & Accounts 2023 |
101
CORPORATE GOVERNANCE REPORT
CONTINUED
Non-executive
Directors
Sanjeevan Bala
Umran Beba
Bob Berlin (since
16 January 2024)
Simon Burke
Jill Caseberry
Patrick Cook
(until 16 January
2024)
Agust
Gudmundsson
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.
The roles and responsibilities of each Non-executive Director are approved by the Group Board and set out
in their letters of appointment.
Of the nine Non-executive Directors, six are Independent whilst three are Non-independent.
NON-EXECUTIVE 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 appetite and governance structures agreed by the Group Board.
As Group Board Committee members, they also review the integrity of the Group’s Financial Statements,
recommend appropriate succession plans, monitor Group Board diversity and set the Directors’ remuneration.
NON-EXECUTIVE 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 each Non-executive Director 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 agenda items. They also have the option to dial-in for meetings.
EXTERNAL APPOINTMENTS
In advance of any new Group Board appointments, each potential new Non-executive Director is asked to
disclose details 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).
Prior to undertaking any additional external appointments, Directors must seek prior approval of the
Group Board. Before approving any additional external appointments, the Group Board considers the time
commitment required for the role, as well as the experience, skills and other commitments of the Director.
Each proposed external appointment shall be reviewed independently. The Company recognises that
external appointments enable Directors to broaden their knowledge and experience. However, they must
not interfere or conflict with their roles on the Group Board.
In respect of Jill Caseberry’s appointment to the role of Senior Independent Director of Halfords Group plc
on 6 September 2023, the Group Board approved the appointment following a review of Jill Caseberry’s
time commitment required for the role, as well as Jill’s experience, skills and other commitments.
MONITORING NON-EXECUTIVE DIRECTOR INDEPENDENCE
During the Group Board and Committees’ annual effectiveness review, the Nomination Committee and
the Group Board review the independence of the Non-executive Directors, giving consideration to the
circumstances which are likely to impair, or could appear to impair, a Non-executive Director’s independence,
as set out in provision 10 of the UK Corporate Governance Code (“the Code”). With the exception of Agust
Gudmundsson, Lydur Gudmundsson, Patrick Cook (Group Board representative of the Baupost Group until
16 January 2024) and Bob Berlin (Group Board representative of LongRange Capital since 16 January 2024),
the Group Board considers the remaining 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 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 Code.
Senior
Independent
Director
Jill Caseberry
The Senior Independent Director (“SID”) acts as a sounding board for the Chairman and serves as a trusted
intermediary for the other Directors when necessary. The SID is also available to shareholders if they are
unable to resolve any concerns through communication with the Chairman, the CEO or other Executive
Directors, or when shareholders prefer to speak to the SID directly.
The SID is responsible for evaluating the performance of the Chairman on behalf of the other Directors.
Led by the SID, the Non-executive Directors meet without the Chairman 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 the Group Board, its Committees and
the Senior Executive Team. She advises the Chairman, the Executive Directors and the Group Board
Committee Chairs in setting agendas for meetings of the Group Board and its Committees, and supports
the accurate, timely and clear flow of information to and from the Group Board and its Committees, and
between Directors and the Senior Executive Team. She leads the Legal function and the Group Company
Secretariat, advises the Group Board on corporate governance matters and is responsible for
administering Bakkavor’s Share Dealing Code and organising the AGM.
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STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
Section 3:
Composition, succession
and evaluation
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 a total of 11 Directors – two Executive Directors and nine Non-executive Directors – and
collectively is well-resourced, with a combination of skills, experience and knowledge. Within this report, we have set
out biographical details of each of the Directors, along with each of their individual dates of appointment.
READ MORE
pg 88.
MEETING ATTENDANCE
The Group Board held eight scheduled meetings during the year and the meeting 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
1
Group Board
Annual General Meeting
Total number of meetings in 2023
8
1
Meetings attended/scheduled meetings eligible to attend
Executive Directors
Mike Edwards
8/8
1/1
Ben Waldron
8/8
1/1
Non-executive Directors
Simon Burke (Chairman)
8/8
1/1
Sanjeevan Bala
8/8
1/1
Umran Beba
8/8
1/1
Jill Caseberry
8/8
1/1
Patrick Cook
2
8/8
1/1
Agust Gudmundsson
8/8
1/1
Lydur Gudmundsson
8/8
1/1
Denis Hennequin
8/8
1/1
Jane Lodge
8/8
1/1
1
Bob Berlin was appointed to the Group Board on 16 January 2024.
2
Patrick Cook stepped down from the Group Board on 16 January 2024.
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103
CORPORATE GOVERNANCE REPORT
CONTINUED
GROUP BOARD COMMITTEE COMPOSITION
Director
Audit and Risk
Committee
Remuneration
Committee
Nomination
Committee
ESG
Committee
Other
Sanjeevan Bala
Designated workforce
engagement NED
Umran Beba
Designated NED for ESG
matters
Simon Burke
Jill Caseberry
Senior Independent Director
Patrick Cook (until 16 January 2024)
Lydur Gudmundsson
Agust Gudmundsson
Denis Hennequin (member of ESG
Committee since 31 January 2024)
Jane Lodge
Committee Chair
Committee member
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 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. When doing so, they take account of the Group Board knowledge and skills
matrix, which identifies key areas of diversity, skill or experience that add to the effectiveness and reach of the Group Board.
Collectively and individually, the Directors are highly experienced with a wide range of skills, understanding and expertise
which facilitates effective and entrepreneurial leadership. The Group Board comprises individuals from a varied range of
backgrounds, each of whom brings a different perspective on a number of key issues for the Group, including strategy,
performance, operations, culture, sustainability, health and safety, data analytics, leadership, ethics and regulation, diversity,
finance, risk and IT. This range of backgrounds and expertise is invaluable to both the Group Board and the Group as a whole.
Group Board skills and experience
Number of Directors
Non-executive Director of Listed Company
7/11
Audit and/or Risk Committee Membership
9/11
Remuneration Committee Membership
6/11
Nomination Committee Membership
7/11
Senior Management (CEO, CFO, COO)
9/11
General experience
Strategic Planning/Oversight
9/11
Corporate Development/M&A
9/11
Manufacturing, Food Production, Food Retail
7/11
Operational, Food Safety and Hygiene
8/11
Qualified Accountant/Auditor (financial expertise)
8/11
IT, E-commerce, Technology and Innovation
5/11
HR and Talent Development
7/11
Legal and Regulatory
4/11
Experience Leading Diversity and Inclusion Initiatives
6/11
Public Relations/Media/Investor Relations
8/11
Operation of an International Business
8/11
Environmental/Sustainability
7/11
Further information can be found on the skills and experience of each Director and appointments to the Group Board.
READ MORE
pg 88.
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STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
GROUP BOARD SUCCESSION
More information on Group Board
succession is available in our
Nomination Committee’s report.
READ MORE
pg 108.
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 Senior
Executive Team, senior leaders and
different teams within the business.
ONGOING PROFESSIONAL
DEVELOPMENT AND SKILLS
TRAINING
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. Directors
will continually update and refresh
their skills and knowledge and seek
independent professional advice when
required. During the year, the Group
Board received dedicated training on
ESG regulation and climate-related
issues, developing skills in climate
and Net Zero; responsible sourcing,
including biodiversity and deforestation;
UK food waste; and packaging. The
Group 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 RE-ELECTION OF THE
GROUP BOARD
The rules governing the appointment
and replacement of Directors can be
found in the Articles of Association,
the Code, the Companies Act 2006 and
related legislation. Under the Terms of
Reference of the Nomination Committee,
any appointment must be recommended
by the Nomination Committee for
approval by the Group Board.
In compliance with the Code, all
Directors will retire and offer
themselves for election or re-election,
as appropriate, on an annual basis. At
our sixth AGM, held on 31 May 2023,
each Director offered himself or
herself for election or re-election as a
Director. All Directors will retire at the
2024 AGM to be held on 23 May 2024
and offer themselves for election or
re-election, as appropriate.
Bakkavor Group plc | Annual Report & Accounts 2023 |
105
CORPORATE GOVERNANCE REPORT
CONTINUED
EXTERNAL GROUP BOARD AND
COMMITTEES’ PERFORMANCE
REVIEW
In accordance with the Code, there
should be formal and rigorous annual
evaluation of the performance of the
Board, its Committees, the Chair and
individual Directors and an externally
facilitated Board evaluation, at least
every three years.
This year, our Group Board and
Committee performance review was
externally facilitated by Clare Chalmers
Ltd (“Clare Chalmers”). The Group
Board considered Clare Chalmers’
appointment appropriate given Clare
is independent and had undertaken
the previous externally facilitated
performance review in 2020 and would
therefore be best placed to comment
on progress achieved since then.
PROCESS
Following appointment, Clare Chalmers
met with the Chairman and Group
General Counsel and Company
Secretary to gain a greater
understanding of the strategy of the
business and context within which
the external Board and Committees’
performance review was being
undertaken and to agree the scope of the
performance review process to cover
a range of agreed topics, including:
•
Board composition.
•
Leadership and succession planning.
•
Board dynamics and decision-making.
•
Strategy, purpose, values and culture.
•
Operation of Board Committees.
•
Board logistics and secretariat support.
The Group Board’s Schedule of Matters
Reserved, the Committees’ Terms of
Reference and a range of Group Board
and Committee papers were reviewed,
and Clare Chalmers attended and
observed our November Group Board
and Committee meetings.
Clare Chalmers held interviews with
the individual Directors and a number
of Senior Executives who interact
regularly with the Group Board, as
well as the Internal and External Audit
Partners, who regularly attend the
Audit and Risk Committee meetings.
The initial conclusions from the
performance review were discussed
with the Chairman and a report was
prepared, which was circulated to all
members of the Group Board and
Committees, which included Clare
Chalmers’ findings and a number of
recommendations. The report was
then presented to the Group Board by
Clare Chalmers and discussed at its
January meeting.
FINDINGS
Clare Chalmers’ evaluation report
was robust and informative and
provided a valuable independent
external perspective on the Group’s
governance. Clare Chalmers noted
that Bakkavor’s Group Board had
in the last 18 months undergone
a considerable transformation.
In particular, the owner-CEO had
become a Non-executive Director,
a new CEO had been appointed and
three new independent Non-executive
Directors had been recruited since
the last external performance review.
These changes have had a positive
impact on the quality of governance
provided by the Group Board, robust
conversations were taking place and
the Non-executive Directors were
able to provide the right balance of
challenge and support.
As well as refreshing the Group Board,
significant steps had been taken to
address the areas suggested for
improvement in the 2020 report.
Clare Chalmers acknowledged the
challenges the business and the sector
as a whole had been through, such
as Covid, inflationary pressures and
supply chain issues. In addressing
these challenges, the Group Board
continues to be able to draw on some
considerable strengths including:
•
Skilled and committed
Non-executive Directors.
•
Positive, collaborative relationships,
based on openness, trust and a
strong sense of common purpose.
•
A dynamic new senior management
team bringing new ideas and
energy to the business.
•
Clear values and purpose, which
are well-socialised throughout the
organisation.
•
Good relationships with stakeholders,
including shareholders, employees
and customers.
•
Good progress on the ESG agenda
resulting in ongoing reductions in
carbon emissions and UK food waste.
Clare Chalmers made a number of
recommendations which included
the following:
•
Continue to drive the Group Board’s
work on the strategy and provide
opportunities to widen some of the
Group Board’s discussions on key
strategic issues.
•
Continue to oversee and monitor
a long-term view of executive
succession and a plan for fostering
talent and preparing executives for
leading roles.
•
In conjunction with the work
from the designated workforce
engagement Non-executive
Director, continue to work on
engaging with the workforce.
•
Continue the good work to further
progress ESG objectives,
particularly with regard to UK food
waste and carbon reduction, whilst
keeping in step with others and
pursuing a pragmatic approach.
•
Oversee the Company’s adoption
of the newly introduced 2024 UK
Corporate Governance Code.
The summary of the Group Board and
Committees’ performance review
set out above has been reviewed and
approved by Clare Chalmers.
Group Board and Committees’
performance review
106
| Bakkavor Group plc | Annual Report & Accounts 2023
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
Nomination
Committee report
During the year, the Committee
oversaw the external Board and
Committee performance review,
reviewed Bakkavor’s governance
structure and approved changes to
the Group Board.
Simon Burke
Chair of the Nomination Committee
Committee
purpose
To review the structure,
size and composition of the
Group Board, and make
recommendations on new
appointments of Executive
and Non-executive Directors.
COMMITTEE MEETINGS
AND MEMBERSHIP
The Committee consists of three
Independent Non-executive
Directors, one Non-independent
Non-executive Director, and the
Chair of the Committee who is also
the Group Board Chair.
READ MORE
pg 88.
2
Scheduled meetings were held
during the year. The Committee
was provided with a detailed People
Priorities Update in June 2023.
Details of members’ attendance at the meetings are set out below:
Member
Member since
Meetings
attended/Total
meetings held
% of
meetings
attended
Simon Burke (Chair)
19 October 2020
2/2
100%
Umran Beba
1 September 2020
2/2
100%
Jill Caseberry
13 August 2021
2/2
100%
Lydur Gudmundsson
20 October 2017
1/2
50%
Denis Hennequin
20 October 2017
2/2
100%
MAIN DUTIES OF THE COMMITTEE
The role of the Committee is to review
and report on the leadership and
succession needs of the Group and
ensure that appropriate procedures
are in place for nominating, training,
evaluating and succession planning for
the Group Board, Senior Executive Team
(“SET”) and senior leaders; considering
the benefits of diverse genders, social
and ethnic backgrounds, cognitive and
personal strengths. The Committee
remains vital to a strong, diverse and
effective Board and Senior Executive
Team that delivers our long-term
strategic objectives.
The Committee discharges its
responsibilities appropriately through
a series of scheduled meetings
during the year, linked to the
Committee’s Terms of Reference,
which are available on the Bakkavor
website (bakkavor.com/en/investors/
governance) and were last updated
in January 2024. After each meeting,
the Committee Chair reports
activities and recommendations to
the Group Board as appropriate.
The Group General Counsel and
Company Secretary attends all
Committee meetings to record minutes
and provide advice to the Directors. The
Chief People Officer (“CPO”) is invited to
update on succession planning, talent
acquisition, learning and development,
and colleague engagement. No Director
attends discussions relating to their
own appointment.
Bakkavor Group plc | Annual Report & Accounts 2023 |
107
DETAILS OF KEY ACTIVITIES
Revised governance structure
The Committee recommended a
revised governance structure to
the Group Board for approval, to
reflect the changes that had been
implemented in the business since
Mike Edwards’ appointment as CEO.
The SET has been established (which
replaces the Management Board) and
meets throughout the year in line with
Group Board meetings to focus on
strategic, operational, commercial,
regulatory and risk matters. The SET
comprises the CEO and CFO (“the
Executive Directors”) and the CPO,
UK Managing Director Meals, UK
Managing Director Bakery, UK
Finance Director and US COO.
Other senior leaders in the business
(risk, regulatory, finance, strategy)
are invited to attend the meetings of
the SET as needed. The Executive
Directors share feedback from these
meetings with the Group Board.
Regional Boards have also been
established, and these meet monthly
to undertake structured reviews of the
business which supports strategic
decision-making and operational
activity in each region, focusing on
operational and commercial matters
affecting the business. The Executive
Directors share feedback from the
Regional Boards with the Group Board.
Board composition
Following the transition of share
ownership from Baupost to
LongRange Capital, the Committee
recommended to the Group Board
the termination of the Baupost
relationship agreement and Patrick
Cook stepping down from the Group
Board. It also recommended to the
Group Board the entry into a
relationship agreement with LongRange
Capital and the appointment of Bob
Berlin as a non-independent Non-
Executive Director to the Group Board.
Board and senior leadership
succession planning
The Committee is vital in promoting
effective Board and leadership
succession. It reviewed succession
planning for the Group Board, SET and
senior leaders to ensure a diverse
pipeline of required skills and expertise.
The Committee’s 2023 activities
1
Group Board and Committee performance review
An external Group Board and Committee performance review was
undertaken in 2023 by Clare Chalmers Ltd (“Clare Chalmers”),
which the Committee considered appropriate given Clare
Chalmers’ independence and ability to comment on progress
achieved since the last external performance review in 2020.
The performance review concluded that the Group Board
and its Committees continue to provide effective leadership
and required levels of governance and control.
NOMINATION COMMITTEE ACTIONS
The Committee will continue to oversee and monitor a
long-term view of Executive succession and a plan for fostering
talent and preparing Executives for leading roles. There will be
increased opportunities for site visits during the course of the
year for the Group Board and individual Non-executive Directors
to meet employees to look at how well the culture is embedded
in the Company and to provide anonymised feedback to the
Group Board. The Committee will also play a key role in the
recruitment of new Independent Non-executive Directors,
as some of the more experienced Group Board members
prepare to stand down in the next three years.
READ MORE
pg 106.
2
Revised governance structure
The Committee approved and recommended to the Group
Board a revised governance structure to reflect the changes
that had been implemented in the last year since Mike Edwards’
appointment as CEO.
3
Board composition and succession planning
The Committee recommended to the Group Board for approval
the appointment of Bob Berlin as a Non-executive Director.
A key 2023 focus was on clear succession planning for the
Group Board, SET and their direct reports.
4
Workforce engagement
The Committee received updates from Sanjeevan Bala, the
designated workforce engagement Non-executive Director.
5
Employee Engagement Survey (“EES”)
The Committee oversaw actions taken in response to the 2022 EES
feedback. It also discussed the results and recommended actions
arising from the 2023 EES which will be carried out in 2024.
NOMINATION COMMITTEE REPORT
CONTINUED
108
| Bakkavor Group plc | Annual Report & Accounts 2023
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
The review included: contingency
arrangements for sudden and
unforeseen exits to ensure orderly
replacement; medium- to long-term
planning for identifying candidates
within the Group; and potential areas
for external recruitment. This
highlighted robust plans for key roles
across the business, supported by our
Senior Executive Development
programme. High-performing senior
colleagues are sometimes invited to
attend Group Board or Committee
meetings to present on specific
matters, projects or their divisions’
performance, serving as good
exposure for our colleagues and an
opportunity for the Group Board to
assess our talent pool. The Group
Board is also updated on our Inclusion
and Diversity plans to prioritise the
development of under-represented
groups through the organisation.
Renewal of Non-executive
Director terms of appointment
The Committee recommended to
the Group Board for approval the
reappointment of Simon Burke,
Denis Hennequin, Umran Beba, Jill
Caseberry and Lydur Gudmundsson
for a further term of three years, given
their independence, performance,
skills and experience which continue
to contribute to the Group Board.
Time commitment of
Non-executive Directors
The Committee reviewed the
responsibilities of the Non-executive
Directors to ensure they are sufficiently
balanced, considering time commitment,
number of Group Board and Committee
meetings held during the year, preparation
and attendance at those meetings. It
is pleased to report that there are no
over-boarding concerns at the current
time, and believes that the Non-executive
Directors have devoted sufficient
time to be effective representatives
of stakeholders’ interests.
INDEPENDENCE OF
NON-EXECUTIVE DIRECTORS
The Committee considered the continued
independence of the Non-executive
Directors and the circumstances which
are likely to impair this independence,
as set out in provision 10 of the Code.
The Committee concluded that all
Non-executive Directors remained
independent, with the exception of Agust
Gudmundsson, Lydur Gudmundsson and
Patrick Cook (Group Board representative
of the Baupost Group), and following
his appointment on 16 January 2024,
Bob Berlin (Group Board representative
of LongRange Capital), who are all
significant shareholders of the Company.
WORKFORCE ENGAGEMENT
The Committee received updates from
the CPO on engagement with Bakkavor’s
SEF and GEF. It reviewed feedback
from the sessions on the involvement
of the SEF in staff pay negotiations, site
conditions and extending the variety of
products available for colleagues at our
staff shops. Additionally, the designated
workforce engagement Non-executive
Director provided updates to the
Group Board.
READ MORE
pg 100.
Feedback from our 2023 EES
The Committee reviewed the 2023 EES
conducted in September 2023 and
discussed the recommended action areas
which it will continue to oversee in 2024.
READ MORE
pg 30.
Inclusion and Diversity
Bakkavor’s success relies on the
skills, experience and commitment
of a diverse workforce. Therefore, all
appointments, including recruitments
and internal promotions, are based
on merit, qualification and ability,
encouraging greater diversity in
social and ethnic background and
cognitive and personal strengths.
Beyond this, we strive to create an
equal and inclusive workplace where
colleagues feel valued, included and
inspired to perform their best.
Our Inclusion and Diversity Policy
supports the delivery of the ‘Trust’
element of our Group strategy and
can be found at: bakkavor.com/en/
esg/esg-reporting/default.aspx).
READ MORE
pg 44.
The Committee received regular
updates on the work of the Inclusion
and Diversity Forum chaired by the
Group General Counsel and Company
Secretary, including a programme of
events to promote inclusive behaviours:
highlighting stories and inspirations
during UK Black History Month,
sharing unconscious bias awareness
training during Pride month, and
showcasing our own heritages during
Celebrate Your Culture at Work Week.
The Committee also received updates
on our new Female Mentoring
programme and Female Networking
Group, designed to develop and
progress female talent within Bakkavor,
as well as our female mentoring cohort
which began in December 2023.
The Committee reviewed and agreed
the Inclusion and Diversity focus
areas for 2024 which are:
1. Achieving better gender balance
•
Implementing job share in
Manufacturing, Finance, IT.
•
Supporting Bakkavor Women’s
Month in March.
•
Female Mentoring programme
and Female Networking Group.
2. Completing the groundwork to
establish our ethnicity position
by
additional efforts to increase completion
of data information by colleagues.
Board division
Committee action
Group Board
•
Used Group Board knowledge and skills matrix to inform
recruitment criteria.
•
Ensured necessary mix of skills and experience across
Group Board to contribute to the strategic objectives.
Senior Executive
Team
•
Looked at succession planning for the Senior Executive
Team, identifying future successors using our
performance rating scale/high-potential framework.
This aligned to our talent principles to develop leaders
at all levels, invest in high potential, develop capabilities
required for the next three years, and promote those
who are 8O% ready for a new role.
Senior leaders
•
Considered longer-term planning for two levels below
the SET, focused on identifying potential candidates within
the Group for progression and areas where external
recruitment may be required.
Bakkavor Group plc | Annual Report & Accounts 2023 |
109
NOMINATION COMMITTEE REPORT
CONTINUED
3. Leadership inclusive behaviours
Feedback on Better Behaviours,
Better Bakkavor (values programme)
to inform our Leadership Development
programmes.
Local causes and community
engagement
The Committee received updates on
the Local Causes and Community
Engagement workstream, and
Bakkavor’s corporate charity programme
with partners GroceryAid and the
Natasha Allergy Research Foundation.
READ MORE
pg 45.
Group Board and Committee diversity
The Committee recognises the
importance and benefits that come
with having a diverse Board, and
considers diversity at succession
discussions for the Group Board and
its Committees and in line with our
Group-wide Inclusion and Diversity
Policy. The Committee is proud of its
progress in this area, with Bakkavor
compliant with the recommendations
of the Parker Review. The Group
Board will continue to appoint based
on merit, skills and experience, being
mindful of the Hampton-Alexander
and Parker Reviews, and considering
all forms of diversity when the
Committee reviews the Group Board
and Committees’ composition.
The Company ensures that potential
candidates for Non-executive Directors
reflect the Group Board’s diversity
commitments in respect of gender
and ethnicity. All lists of potential
appointments include at least 50%
female candidates, and the Company is
committed to ensuring that candidates
from all ethnicities are considered.
For Group Board appointments, we
use Executive Search Consultants
signed up to the Voluntary Code of
Conduct for Executive Search Firms,
setting out the key principles of best
practice which include the
consideration of gender diversity.
The Financial Conduct Authority’s
Listing Rule 9.8.6R(10) (“the Rule”) on
diversity and inclusion disclosures
applies to financial periods commencing
on or after 1 April 2022 and requires
companies to explain where they do not
meet the following targets: at least 40%
of the Board are women; at least one
senior Board position (Chair, CEO,
Senior Independent Director, CFO) is
held by a woman; and at least one
Board member is from a minority
ethnic background.
Bakkavor does not meet the target
with respect to the requirement that
at least 40% of the Board are women,
(currently, there are three women
out of the 11 members on the Group
Board). It is our aim to meet this
requirement when there is suitable
opportunity to do so. We are pleased
to report that one of Bakkavor’s senior
Board positions is held by a woman,
following the appointment of Jill
Caseberry as Senior Independent
Director, effective 1 January 2023, and
one Board member is from a minority
ethnic background, following the
appointment of Sanjeevan Bala to the
Group Board in August 2021. These
targets were met on 30 December
2023 and no changes have occurred
since then which affect the Company’s
ability to meet the targets.
DIVERSITY REPRESENTATION
AS AT 4 MARCH 2024
The following tables set out the
information required to be disclosed
under the Rule as at 4 March 2024.
For the purposes of these tables,
executive management is as defined in
the Listing Rules, being the Executive
Committee or the most Senior
Executive or managerial management
body below the Board (or where
there is no such formal Committee
or body, the most senior level of
managers reporting to the Chief
Executive), including the company
secretary but excluding administrative
and support staff. For Bakkavor, this
is the SET including the Group General
Counsel and Company Secretary.
Collection of data was carried out
on the basis of self-reporting.
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.
Overall, there has been good progress
made this year. I would like to express
my thanks to my colleagues on the
Committee for their ongoing support.
Simon Burke
Chair, Nomination Committee
4 March 2024
Reporting table on sex and gender representation
Percentage of the Group
Board
Number of
Group
Board
members
Percentage
of the Group
Board
Number of senior
positions on the
Board (CEO, CFO,
SID and Chair
Number in
executive
management
Percentage
of executive
management
73%
27%
Male
8
73%
3
5
63%
Female
3
27%
1
3
37%
Not specified/
prefer not to say
–
–
–
–
–
Reporting table on ethnicity
Percentage of the Group Board
Number of
Group
Board
members
Percentage
of the Group
Board
Number of senior
positions on the
Board (CEO, CFO,
SID and Chair
Number in
executive
management
Percentage
of executive
management
91%
9%
White British or
Other White
(including
minority White
groups)
10
91%
4
5
63%
Mixed Multiple
Ethnic Groups
–
–
–
1
12.3%
Asian/Asian
British
1
9%
–
1
12.3%
Black African/
Caribbean/
Black British
–
–
–
1
12.3%
Other Ethnic
Group including
Arab
–
–
–
–
110
| Bakkavor Group plc | Annual Report & Accounts 2023
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
ESG
Committee report
The Committee recognises the step-
change that has been made in ESG,
particularly on our three strategic
priorities: climate and Net Zero, UK
food waste and sustainable sourcing.
Umran Beba
Chair of the ESG Committee
Committee
purpose
Oversight of the Group’s ESG
strategy, Trusted Partner, and
its execution. Specifically, the
Committee recognises that
our Group-wide commitment
to Net Zero by 2040 is a
significant challenge that
requires a multi-faceted
approach across our functions
and operations, supported
by financial investment. The
Committee will oversee work
already underway to get a full
and detailed understanding of
where we stand, and what we
need to do in the years ahead
to set and achieve our climate
transition plan.
3
meetings held during the year.
100%
meeting attendance by
all Committee members.
COMMITTEE MEETINGS AND
MEMBERSHIP
On 16 January 2024, Patrick Cook
stepped down from the Group Board
and as a member of the Committee. We
wish to thank Patrick for his contribution
during his tenure and welcome Denis
Hennequin who was appointed as
a member of the Committee on
31 January 2024. As of 31 January
2024, the Committee consists of four
Independent Non-executive Directors.
READ MORE
pg 88.
The Committee held three scheduled
meetings during the year in accordance
with its Terms of Reference. Details of
members’ attendance at the meetings
are set out below:
Member
Meetings
attended/Total
meetings held
Umran Beba
(Chair)
3/3
Sanjeevan Bala
3/3
Patrick Cook
3/3
Jane Lodge
3/3
MAIN DUTIES OF THE COMMITTEE
The role of the Committee is to have
oversight of the Group’s ESG strategy,
Trusted Partner, and its execution.
It also oversees the communication
of the Group’s ESG activities with
its stakeholders and provides input
and advice to the Group Board and
its Committees on the Group’s
performance against ESG metrics
and on the setting of ESG targets
and other ESG matters as required.
The Committee discharges its
responsibilities through scheduled
meetings during the year. These are
linked to its Terms of Reference, which
are available on the Bakkavor website
(bakkavor.com/en/investors/governance)
and last updated in February 2024.
Following each meeting the Committee
Chair, who is also the designated
Non-executive Director for ESG
matters, reports to the Group Board on
the Committee’s activities and makes
recommendations as appropriate.
The Group General Counsel and
Company Secretary attends all
Committee meetings to record minutes
and provide advice to the Directors.
The CFO, who is the ESG Group Board
Sponsor, the Chief People Officer
(“CPO”), the UK Finance Director and the
Head of Group ESG Strategy are standing
attendees at the Committee meetings.
Bakkavor Group plc | Annual Report & Accounts 2023 |
111
ESG COMMITTEE REPORT
CONTINUED
DETAILS OF KEY ACTIVITIES
Oversight of Trusted Partner
ESG strategy
The Committee reviewed the Trusted
Partner ESG strategy focus areas,
priority issues and commitments
across Responsible Sourcing,
Sustainability and Innovation and
Engagement and Wellbeing.
Non-financial KPIs
Reducing UK food waste, accidents
and carbon emissions in a difficult
trading environment demonstrates
the resilience and importance of our
ESG objectives. The Committee
received updates from management
on the following non-financial KPIs:
UK food waste, UK accidents, Group
net carbon emissions and UK
employee turnover.
UK food waste reduction is a key
priority within our Bakkavor
Operational Excellence model, and
during the year, the Committee
approved the introduction of UK food
waste as an additional ESG measure
to the STIP, alongside employee
turnover, in line with our ESG targets.
READ MORE
pg 124.
The Committee’s 2023 activities
1
Reviewed and signed off the Group’s 2022 ESG report for
publication on the Bakkavor website (bakkavor.com/en/esg/
esg-reporting)
Our dedicated ESG report contains a detailed overview
of our Trusted Partner strategy and progress against our
ESG objectives and activities throughout 2022.
2
Approved science-based targets for submission to the Science
Based Targets initiative (“SBTi”) and oversaw the steps taken
to develop the Group’s climate transition plan
We have now expanded on our commitment to reach Net Zero
greenhouse gas emissions across the full value chain by 2050
and set interim targets to reduce Scope 1, 2 and 3 emissions
by 42% by 2030.
3
Reviewed and approved the TCFD report
The Committee reviewed the approved disclosures contained
within the TCFD report in response to the TCFD recommendations
and compliance with the FCA’s Listing Rule 9.8.6R (8).
4
Received a dedicated training session from external
ESG strategy consultants
This sought to develop skills and knowledge of ESG regulation,
including disclosures related to climate and biodiversity.
5
Approved the ESG targets for the STIP and LTIP schemes
UK food waste has been introduced as an additional ESG
measure for the STIP, alongside employee turnover. Carbon
emissions has been introduced as an ESG measure for the LTIP.
6
Group Board and Committees’ performance review
During the year, an external performance review of the
Committee was carried out in accordance with the requirement
of the Code and recommendations of the Financial Reporting
Council’s Guidance on Board Effectiveness.
The resulting report noted that the Committee should continue
the good work to further progress ESG objectives, particularly
with regard to UK food waste and carbon reduction, while
keeping in step with others and pursuing a pragmatic approach.
READ MORE
pg 103.
112
| Bakkavor Group plc | Annual Report & Accounts 2023
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
Environmental
Our climate transition planning has
been a major focus for 2023.
During the year, the Committee had
oversight of the steps taken to prepare
our business by developing our
delivery roadmap and embedding Net
Zero into our governance structures.
In 2023 we further built on our
ambitions and the Committee
approved the submission of Net Zero
aligned targets for all scopes to the
Science Based Targets initiative
(“SBTi”). As part of this, we submitted
near-term and long-term targets to
the SBTi, which include reducing net
Scope 1 and 2 emissions Group-wide
by 42% and Scope 3 emissions from
purchased goods and services by 42%,
both by 2030 from a 2021 baseline.
This means that we have now expanded
on our commitment to reach Net Zero
greenhouse gas emissions across the
full value chain by 2050.
The Committee received regular
updates on environmental issues
under the Trusted Partner strategic
focus areas including:
•
Responsible Sourcing: supply chain
human rights and environmentally
sustainable sourcing, including
deforestation and biodiversity topics.
•
Sustainability and Innovation: UK
food waste, resource efficiency and
emissions, impact of packaging and
product innovation.
We are pleased with the
improvements made to support our
progress towards achieving the UK
Plastics Pact’s 2025 industry goals:
in 2023 we eliminated 1,390 tonnes of
plastic – an 8% reduction – across
our product ranges in the UK through
removal and light-weighting projects
and no items on the UK Plastics
Pact’s ‘Problem list’ for elimination
are used in our products.
READ MORE:
ESG: TCFD pg 50.
ESG: Trusted Partner pg 38.
Social: engagement and wellbeing
The Committee received updates
from the CPO and the Head of Group
ESG Strategy on the ESG impacts on
our Communities and Colleagues
stakeholder groups, including:
•
Updates on colleague safety,
wellbeing and engagement,
development and retention.
•
Information on our risk-based
approach managing human
rights issues in both our supply
chain and own operations.
•
Succession planning.
•
Inclusion and Diversity initiatives and
activities undertaken at local sites.
The Committee reviewed Bakkavor’s
progress against a ‘Good Practice
Implementation Checklist’ for tackling
modern slavery, and action plans in
place to drive further improvements
in the scores throughout 2023, and
recommended the Modern Slavery
Statement for approval by the
Group Board.
READ MORE
pg 130.
Governance
Throughout the year, the Committee
provided regular updates to the Group
Board on the execution of the Trusted
Partner ESG strategy and performance
against non-financial KPIs.
Members of the Committee and the
Group Board received a dedicated
training session from external
advisers, focusing on developing
ESG regulation, including climate
disclosures which enabled the
attendees to develop further skills and
knowledge in relation to ESG matters.
Looking ahead, the Committee
remains confident that our ESG
agenda strengthens and complements
Bakkavor’s business strategy and helps
the Company to fulfil its purpose and
grow in a positive and sustainable way.
READ MORE:
ESG governance framework pg 39.
ESG: TCFD pg 50.
Umran Beba
Chair, ESG Committee
4 March 2024
Bakkavor Group plc | Annual Report & Accounts 2023 |
113
Audit, risk and internal control
ACCOUNTABILITY
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.
READ MORE
pg 147.
AUDIT, RISK AND INTERNAL
CONTROL
The Group has a well-established
approach and framework for managing
risks and uncertainties, which form
part of the Directors’ report.
READ MORE
pg 72.
RISK MANAGEMENT AND
INTERNAL CONTROL
The Group 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 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 that Bakkavor is
willing to take in order to achieve
its long-term strategic objectives.
•
Ensure the maintenance of the
Group’s risk management and
internal control systems, reviewing
them annually.
The risk management framework
is supported by a system of internal
controls designed to embed the
effective management of the key
business risks throughout the Group.
The Group Board receives
presentations on Group risk twice a
year. This includes a comprehensive
review and consideration of changes
to both existing and emerging risks,
with particular attention to appetite
across the principal risks. Detailed
risk and control reviews are
conducted for each of the principal
risks, with additional presentations
from the Group IT Director covering
cyber security and the Group
Technical Director covering health
and safety and food safety.
As delegated by the Group Board,
the Audit and Risk Committee is
responsible for establishing
procedures to oversee the internal
control framework. It 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
include: the risks that are relevant
to business activity; the effectiveness
of internal controls in dealing with
these risks; and an update on any
necessary corrective actions.
The Group Board receives regular
reports from the Audit and Risk
Committee and verbal updates from
the latter’s Chair after each meeting.
This enables an evaluation of how
the Group can continue to improve
the effectiveness of its approach to
risk management.
114
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STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
Day-to-day risk management is led by
Senior Management, with ownership of
individual risks per the Risk Register
assigned to members of the Senior
Management team. Management of
risk is embedded in daily working
practices and underpinned by
Bakkavor’s policies, 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
by the Audit and Risk Committee as
part of a structured business review,
and reported back to the Group Board.
The process for identifying, evaluating
and managing the principal risks has
been in place throughout the financial
year. Up to the date of approval of the
Annual Report and Accounts, the
process accords with the Financial
Reporting Council’s (“FRC”) guidance
on risk management, internal control
and related financial and business
reporting. It is regularly reviewed by
the Group Board and the Audit and
Risk Committee.
The internal control system provides
Senior Management with an ongoing
process for risk management. It can
only provide reasonable, and not
absolute, assurance, as it is designed to
manage rather than eliminate all risks.
In analysing and reviewing risk and the
Group’s system of internal controls,
the Audit and Risk Committee and the
Group 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
that they regard as desirable or
acceptable for the Group to bear.
•
The likelihood that the risk concerned
will materialise, and the associated
impact of this as a consequence.
•
The Group’s ability to reduce the
incidence and impact on its business
for 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.
•
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
UK-adopted 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.
—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.
Bakkavor Group plc | Annual Report & Accounts 2023 |
115
Audit and Risk
Committee report
COMMITTEE MEETINGS
AND MEMBERSHIP
The Committee currently comprises
three Independent Non-executive
Directors. Jane Lodge has recent and
relevant financial experience, having
spent 25 years at Deloitte, and the
Committee as a whole has competence
relevant to the sector in which
Bakkavor operates.
READ MORE
pg 88.
4
meetings were held during the year.
100%
meeting attendance of Committee
members.
Details of members’ attendance at the meetings are set out below:
Member
Member since
Meetings
attended/Total
meetings held
% of
meetings
attended
Jane Lodge (Chair)
3 April 2020
4/4
100%
Sanjeevan Bala
1 August 2021
4/4
100%
Umran Beba
1 January 2023
4/4
100%
MAIN DUTIES OF THE COMMITTEE
The role of the Committee is to monitor
the integrity of the Group’s Financial
Statements and announcements,
review internal financial controls and
risk management systems, monitor
and review the Internal Audit function,
recommend the appointment of the
External Auditors, review the
effectiveness of their work and
develop and implement policy on
the use of the External Auditors
for non-audit services.
The Committee discharges its
responsibilities appropriately through
a series of scheduled meetings during
the year, linked to the Committee’s
Terms of Reference, which are
available on the Bakkavor website
(bakkavor.com/en/investors/
governance). The Terms of Reference
were last updated in February 2024.
Following each Committee meeting, the
Committee Chair reports to the Group
Board on the activities of the Committee
and makes recommendations to the
Group Board as appropriate.
Only Committee members have the
right to attend meetings, but the CFO,
Finance Director – Transformation,
Treasury & Risk, the Internal Auditors
KPMG LLP (“KPMG”) and the External
Auditors PriceWaterhouseCoopers
LLP (“PwC”) are invited to attend
meetings of the Committee as the
Committee feels appropriate.
The Committee also meets privately
without management present and
the Committee Chair meets with
the External and Internal Auditors,
without management present, on
a regular basis in order to discuss
any issues which may have arisen.
Committee
purpose
The 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.
The Committee focused its core
responsibilities on supporting
the Group Board and protecting
the interests of shareholders
in relation to financial reporting
and internal control.
Jane Lodge
Chair of the Audit and Risk Committee
116
| Bakkavor Group plc | Annual Report & Accounts 2023
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
Section 4:
Audit, risk and internal controls
GROUP BOARD AND COMMITTEES’
PERFORMANCE REVIEW
During the year, a performance
review of the Committee took place
in accordance with the requirement
of the Code and recommendations
of the Financial Reporting Council’s
Guidance on Board Effectiveness.
The performance review indicated that
the Committee continues on an upward
trajectory, under the strong leadership
of its Chair. Described as experienced
and inclusive, the Chair takes care to
ensure all the Committee members
can put forward their views.
The Committee’s focus over the next
year will be on the implementation of the
newly introduced 2024 UK Corporate
Governance Code, particularly in
relation to audit, risk and internal
control and the application of the
Minimum Standard: Audit Committees
and the External Audit. The Committee
will also focus on providing oversight
and challenge of the project to replace
the UK ERP system.
The Group Board is satisfied that the
Chair, Jane Lodge, has significant
financial experience in the UK listed
environment, and the necessary
qualifications, skills and experience to
fulfil the role as the Committee Chair.
READ MORE
pg 106.
Key activities in 2023
1
Ensured that the Group can manage its risks and has the
processes needed to make going concern and viability
statements, through: a robust and consolidated risk management
process; and an effective internal control framework.
2
Conducted in-depth reviews of our risk management and
mitigation in health and safety, food safety and integrity,
IT systems including the potential replacing of the UK ERP
system, tax compliance and treasury and pensions.
3
Continued to focus on ensuring the integrity, quality and
compliance of the Group’s external financial reporting.
4
Focused its attention on challenging and supporting
management’s response to a tough operating environment
with significant inflation and supply chain disruption.
This was done by ensuring that the ongoing risks and the
relevant mitigating actions have been appropriately modelled
and managed.
5
Continued to oversee, in conjunction with the ESG Committee,
the alignment of ESG focus areas within the Group’s principal
risks and reviewed the Group’s financial reporting approach
to the recommendations of TCFD.
6
Considered the potential impact of any changes needed to the
Group’s risk management framework and its internal control
systems in response to the proposed changes arising from
UK Corporate Reform.
Bakkavor Group plc | Annual Report & Accounts 2023 |
117
AUDIT AND RISK COMMITTEE REPORT
CONTINUED
Details of key activities during the year
HOW THE COMMITTEE HAS DISCHARGED ITS RESPONSIBILITIES DURING 2023
Key areas of focus
The Committee has an extensive agenda which focuses on the audit, assurance and risk management processes within
the business. During 2023, the work of the Committee principally fell under the following key areas:
KEY AREAS OF FOCUS AND MATTERS CONSIDERED
FINANCIAL REPORTING
The Committee reviewed the form and content of the Annual Report and Accounts 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 the highly inflationary environment and the potential for weaker consumer demand on the
full-year Financial Statements.
•
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 2023 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 2023. Before recommending their release to the Group Board,
it 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 Accounts for the period ended
30 December 2023.
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 Accounts.
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 weaker consumer demand on revenue volumes following
the recent inflationary pressures and the potential impact of further cost inflation on the Group’s performance. 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 2025 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 30 December 2023, 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 of
goodwill and intangible assets. 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 2032 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 Committee
challenged management on the key assumptions used in the impairment review. The impairment review indicated that no
impairment provisions were required for the period ended 30 December 2023.
•
Reviewed and approved the associated disclosure in the Financial Statements including the sensitivity analysis in respect
of the US CGU.
118
| Bakkavor Group plc | Annual Report & Accounts 2023
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
KEY AREAS OF FOCUS AND MATTERS CONSIDERED
FAIR, BALANCED AND UNDERSTANDABLE REPORTING
Each year, in line with Provision 25 of the 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 Senior Executive Team (“SET”), whether disclosures in the
Group’s published Financial Statements are 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 CFO 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 30 December 2023, 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.
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 and safety, food safety and integrity, IT systems
(cyber security risks, legacy systems and business continuity), treasury and pensions, 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 of the Annual Report and Accounts.
•
Reviewed a report from external advisors on the impact to the business of the proposed changes to the UK Corporate
Governance Code. The Committee also received training, from our internal auditors (KPMG), specifically regarding the
financial scoping element of these proposed changes.
•
Reviewed and approved the Internal Audit Plan for 2024, 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 that the risk management and internal control procedures comply with the requirements of the
Guidance on Risk Management, Internal Control and Related Financial and Business Reporting published by the FRC.
The Committee has reported this opinion to the Group Board.
PRINCIPAL RISKS AND VIABILITY
The Committee:
•
Reviewed and approved the reduction of principal risks from 15 down to 10, and noted the reduction reflects the current
risk environment and allows us to increase our focus on the key risks to the business.
•
Evaluated a paper from management that set out the view of the Group’s longer-term viability and the forecasts over
the Group’s three-year planning horizon, taking account of the potential risks faced by the business over that period.
•
Reviewed and approved the principal risks and uncertainties disclosures and the viability statement in the Annual
Report and Accounts.
Taking the management assessment into account and having considered other relevant information in terms of the risk
profile of the Group, the Committee agreed to recommend the viability statement to the Group Board for approval.
Bakkavor Group plc | Annual Report & Accounts 2023 |
119
AUDIT AND RISK COMMITTEE REPORT
CONTINUED
KEY AREAS OF FOCUS AND MATTERS CONSIDERED
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.
In the past three years the Company has rapidly scaled technology, driven change and delivered some major successes
at an operational, people and security level and during 2023 delivered a step-change in our cyber maturity within the UK,
with our key technology-based mitigations being delivered.
During the year, work has taken place in relation to technology transformation, including approving a proposal to investigate
the replacing of our ERP systems in the UK. It is expected that a proposal for the upgrade system will be presented to the
Group Board for approval in the first quarter of 2024 and following Board approval, we will move into a more detailed design
phase in the first half of 2024.
TCFD
The Group has reported under the TCFD framework for 2023. The Committee, in conjunction with the ESG Committee,
reviewed the Group’s financial reporting approach to TCFD.
The Committee:
•
Challenged management’s approach to reporting under the TCFD framework for 2023.
•
Reviewed the TCFD report prepared by management, including the Scope 3 emissions and carbon emissions data
for 2023, 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.
•
Reviewed the principal risk ‘Climate change and sustainability’ and ensured climate-related risks were considered
in the Group’s viability assessment and impairment reviews.
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.
EXTERNAL AUDIT
Following a competitive tender carried out in 2018, PwC have been the Group’s External Auditors 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 2023 Audit Plan and agree areas of focus.
•
Assessed regular reports from PwC on the progress of the 2023 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 2023 year-end and was briefed by PwC on their approach to the
audit of critical accounting estimates and areas where significant judgement is needed.
•
Approved the Audit Plan and the main areas of focus, including impairment reviews for goodwill and intangible assets,
including the sensitivity analysis in respect of the US CGU.
•
Reviewed and discussed with PwC its Audit and Risk Committee report on the 2023 Financial Statements which highlighted
any matters arising from the audit work undertaken by the External Auditors and no significant issues were identified.
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 2023 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.
•
Total audit fees of £1.2m were paid to the External Auditors in 2023.
120
| Bakkavor Group plc | Annual Report & Accounts 2023
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
KEY AREAS OF FOCUS AND MATTERS CONSIDERED
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 which is reviewed on
an annual basis.
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. The Committee provided prior approval for this, having noted that the
External Auditors’ knowledge of the business made them the preferred choice.
Non-audit fees of £45,000 were paid to the External Auditors for these services.
Further information on the Audit and non-audit fees can be found in Note 6 of the Notes to the Consolidated Financial
Statements pg 183.
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.
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. The Committee reviewed the FRC’s practice aid on
assessing audit quality 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 2023 Audit Quality Inspection and Supervision 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.
•
The content of reports on audit findings and other communications.
The assessment highlighted that PwC had provided a detailed review of the full-year 2022 Annual Report and Accounts
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 2023 External
Audit and these were reflected in the approach presented to the Audit and Risk Committee for the full-year 2023 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 including the sensitivity analysis in respect of the US CGU. In addition, PwC challenged
management’s assumptions around downside scenarios including the implications of weaker consumer demand on
revenue volumes following the recent inflationary pressures and the potential impact of further cost inflation on the
Group’s performance.
Bakkavor Group plc | Annual Report & Accounts 2023 |
121
AUDIT AND RISK COMMITTEE REPORT
CONTINUED
KEY AREAS OF FOCUS AND MATTERS CONSIDERED
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 2024 AGM.
OUR INTERNAL AUDIT
The Committee oversees the performance, resourcing and effectiveness of the Internal Audit’s 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 Finance
Director – Transformation, Treasury & Risk, who reports to the Committee. The Internal Audit provides assurance over
the effectiveness of key internal controls, as identified as part of the risk assessment process. KPMG reports to the
Finance Director – Transformation, Treasury & Risk throughout the year and to the Committee at least four times a year.
The Committee:
•
Reviewed and assessed the Internal Audit (“IA”) Plan for 2023. The proposed plan represents the 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; and iii) coverage of information security/cyber controls and the continued importance of
infrastructure, network and data security to the Group.
•
Reviewed and approved the Internal Audit Charter.
•
Assessed the Audit quality.
•
Reviewed and monitored management’s responsiveness to the findings and recommendations of the Internal Audit’s activity.
•
Reviewed the satisfactory findings following a full compliance review for UK health and safety activities with on-site visits
and detailed testing as well as Assurance Maps for Health and Safety following desktop reviews for the US and China.
•
Received all reports from the Internal Audit and, in addition, received summary reports on the results of the work of
the Internal Audit on a periodic basis.
The Committee is actively engaged in strengthening the Internal Audit’s activity and extending its scope during 2024.
OUR INTERNAL AUDIT’S 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 the Internal Audit is appropriate for
the business.
•
Review and monitor management’s responsiveness to the Internal Auditors’ findings and recommendations.
The assessment highlighted that the Committee considered that the Internal Audit function was highly effective and
noted that, going forward, the Internal Audit function should continue to cultivate relationships within the business
to have more impact and influence across the Group.
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STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
KEY AREAS OF FOCUS AND 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, noting that as part of our annual legal and governance compliance programme, UK colleagues
undertook their mandatory refresher training module on anti-bribery and corruption during 2023.
The Committee reviewed the Anti-bribery and Business Ethics Policy which applies across the Group and concluded that
the policy remains adequate.
PRIORITIES FOR 2024
The Committee’s key priorities for 2024 include the following:
•
Continue to focus on the integrity, quality and compliance of the Group’s external reporting.
•
Provide challenge in respect of significant judgements and critical estimates that impact financial reporting.
•
Detailed monitoring and challenge of the Group’s principal risks including reviewing emerging risks.
•
Review the Group’s financial reporting relating to TCFD including the climate transition plan.
•
Provide oversight and challenge of the project to replace the UK ERP system.
•
Assess the impact of the changes introduced by the 2024 UK Corporate Governance Code, effective from 1 January 2025
and ensure that appropriate plans are in place to enhance internal controls documentation and testing in light of the
requirements under Provision 29, effective from 1 January 2026.
•
Oversight of the application of the Financial Reporting Council’s Minimum Standard: Audit Committees and External Audit.
Jane Lodge
Chair, Audit and Risk Committee
4 March 2024
Bakkavor Group plc | Annual Report & Accounts 2023 |
123
Directors ’
remuneration report
The Committee reviewed
the Directors’ Remuneration
Policy to ensure it remains
fit for purpose over the next
three-year period.
Jill Caseberry
Chair of the Remuneration Committee
Committee
purpose
The Remuneration Committee
(“the Committee”) designs
and implements the Directors’
Remuneration Policy (the
“Remuneration Policy”), setting
the framework and parameters
within which Directors are paid,
and ensures payments are
consistent with the Policy and
that outcomes are in line with the
Group’s performance and aligned
with stakeholder experience.
4
meetings held during the year.
100%
meeting attendance by
all Committee members.
The Committee comprised three Independent Non-executive Directors.
Member
Member since
Meetings
attended/Total
meetings held
% of
meetings
attended
Jill Caseberry (Chair)
1 March 2021
4/4
100%
Umran Beba
1 September 2020
4/4
100%
Sanjeevan Bala
1 January 2023
4/4
100%
MAIN DUTIES OF THE COMMITTEE
The role of the Committee is to set
remuneration for the Executive
Directors, Chairman and key
management personnel, ensuring
that decisions are taken with a clear
understanding of the Company’s
wider remuneration principles and
practices. The Committee is key in
ensuring that the Group’s approach to
remuneration attracts and motivates
our Executives and aligns with the
long-term interests of shareholders.
The Committee discharges its
responsibilities appropriately through
a series of scheduled meetings during
the year, linked to the Committee’s
Terms of Reference and Remuneration
Policy, which are available on the
Bakkavor website at bakkavor.com/en/
investors/governance/default.aspx. The
Terms of Reference were last reviewed
in November 2023. The Remuneration
Policy in place in 2023 was approved by
shareholders at the 20 May 2021 AGM
and a new Remuneration Policy is set
out in this Remuneration Report,
subject to approval by shareholders
at the AGM on 23 May 2024. Following
each Committee meeting, the
Committee Chair reports to the
Group Board on the activities of
the Committee as appropriate.
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STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
Section 5:
Remuneration
THIS REPORT COMPRISES:
Annual Statement:
a summary of the
work of the Committee during the year
and our approach to remuneration.
The 2024 Directors’ Remuneration
Policy:
details the framework and
parameters within which Directors
are paid, subject to shareholder
approval at the 2024 AGM.
READ MORE
pg 127.
Annual Report on Remuneration:
sets out the pay and incentive outcomes
for the year under review and how the
Remuneration Committee intends to
implement the Remuneration Policy
in 2024.
READ MORE
pg 138.
At the AGM on 23 May 2024, there
will be an advisory vote on, together,
the Annual Statement and the Annual
Report on Remuneration, and a
separate binding vote on the 2024
Directors’ Remuneration Policy.
Key activities in 2023
1
Reviewed performance against the FY22 STIP and FY20 LTIP targets and determined the payout/vesting.
2
Determined the measures and performance targets for the FY23 STIP and LTIP awards.
3
Consideration of developments in market trends, good practice and updated investor and proxy agency
guidance.
4
Reviewed the Directors’ Remuneration Policy that will be put forward for a shareholder vote at the
2024 AGM.
5
Received updates from the Chief People Officer (“CPO”) on pay and benefits across the wider
workforce and how they align with Bakkavor’s culture and those applying to senior colleagues.
6
An update and Q&A session with Sanjeevan Bala (our Non-executive Director tasked with workforce
engagement and bringing colleague views to the Group Board) at our Group Employee Forum
‘workforce engagement session’ in May 2023 on how Executive remuneration aligns with Bakkavor’s
wider pay policies.
Annual Statement
FY23 BUSINESS PERFORMANCE
The operating environment remained
challenging in 2023 and although
inflationary headwinds eased later in
the year, they remained significant
with the business facing £133m of
cost inflation. Cost of living pressures
for our consumers and ongoing
difficulties in the supply chain created
further challenges for the Group.
Despite all of this, we have delivered
a robust trading performance, with
5.3% like-for-like revenue growth
and were able to protect our
profitability, achieving adjusted
operating profit ahead of market
expectations at £94.3m, an increase
of £4.9m year-on-year. The Group’s
enhanced focus on cash management
saw us further strengthen our
balance sheet; reducing leverage
from 1.9x to 1.5x, which is the bottom
of our target range whilst retaining
significant liquidity headroom against
debt facilities. Further progress was
made in 2023 with embedding ESG
into the Group’s ways of working,
including the approval of science-
based targets for submission to the
Science Based Targets initiative
(“SBTi”) and continued improvement
in UK food waste, which reduced by
150 basis points to 6.6%. A number of
initiatives were also put in place to
focus on reducing employee turnover,
a key measure for the Group. These
included: the roll-out of a behavioural
change training course (Better
Behaviours, Better Bakkavor); a
significant focus on improved
communications with our weekly
workforce; a focus on pay and benefits
including a new staff shop offering;
and a review of pay rates with
subsequent increases for both our
weekly and monthly paid colleagues.
READ MORE:
Chairman’s statement pg 8.
Chief Executive’s overview pg 10.
Bakkavor Group plc | Annual Report & Accounts 2023 |
125
DIRECTORS’ REMUNERATION REPORT
CONTINUED
REMUNERATION OUTCOMES FOR FY23
Variable pay – STIP
The STIP for 2023 was based on two measures which were
met in full:
Element
Weighting
Metric
Outcome
Financial
75%
Group adjusted
EBIT, also
referred to as
Group adjusted
operating profit
Met in full: FY23
Group adjusted
EBIT of £94.3m
versus maximum
of £93m
Non-financial 25%
Colleague
engagement
measured through
UK employee
turnover
Met in full: FY23
UK employee
turnover of 26.2%,
versus threshold of
28.1% and
maximum of 26.7%
The Committee carefully considered whether the level of
payment was appropriate or whether any adjustment or
use of negative discretion was required to reflect the
overall performance of the business and the impact on
broader stakeholders. On balance, the Committee felt that
a STIP outcome of 100% of the maximum was appropriate
given the strong financial and non-financial performance
delivered over the course of the year against a challenging
market backdrop. In arriving at this decision, the
Committee took into account the following factors:
•
The Group delivered a very strong financial performance
against a challenging backdrop, with further significant
inflation across the cost base and continued pressure on
household budgets, which has impacted consumer behaviour.
•
The balance sheet remains robust, with leverage at the
bottom end of the target range and significant liquidity
headroom on debt facilities.
•
Total FY23 dividend of 7.28 pence per Ordinary share,
an increase of 5% on FY22.
•
Improvement in all strategic focus areas for ESG as well
as an increase in our overall engagement score from our
Employee Engagement Survey for 2023.
Variable pay – performance and restricted share awards
Mike Edwards and Ben Waldron were granted performance
share and restricted share awards under the LTIP in
October 2020 (prior to them joining the Board). These
awards were delayed from the usual April grant date as the
Board and the Remuneration Committee prioritised their
efforts on dealing with the emergence of the pandemic.
The performance share awards were subject to a relative
total shareholder return (“TSR”) condition which was
measured to October 2023. Performance over the three-year
performance period placed Bakkavor in the top quartile of
the peer group and therefore these awards have vested in
full. The grants to Mike and Ben were subject to a cap which
limited the potential value at the point of vesting. The value
at vesting was below the cap and therefore no post-vesting
adjustment was required. These awards, consistent with
the terms granted to other below Board employees at the
time, did not include a provision relating to windfall gain
adjustment. Nevertheless, the Committee is satisfied that
the vesting is appropriate, having considered the good
progress of the business since 2020 despite the
considerable headwinds of Covid, Brexit, supply chain
disruptions and unprecedented inflation. This includes:
•
Group sales, Group EBIT and Group ROIC all above
2020 levels.
•
Net debt 31% lower than in 2020.
•
Delivered a major cost reduction programme and
efficiency improvement in the UK.
•
Emissions forecast to drop by 25% thanks to
modernisation of refrigeration systems and purchase
of green electricity in the UK.
•
Decline of UK food waste driven by better monitoring
and subsequent process improvements as well as
re-distribution efforts.
Performance share awards were also granted in April
2021 shortly after both Executives joined the Board as
Executive Directors. These awards were subject to a relative
TSR measure and an Adjusted EPS condition in equal
measure. The EPS condition has not been met; however,
reflecting the continued strong relative performance of
the business, the TSR measure was met in full. Overall,
this will result in 50% of the April 2021 award vesting.
The grants to Mike and Ben were subject to a cap which
limited the potential value at the point of vesting. The value
at vesting was below the cap and the Committee believes
the vesting outcomes are reflective of company and
individual performance over the period and no discretion
has been used to amend the payouts or vesting outcomes.
126
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STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
EXECUTIVE DIRECTOR TOTAL REMUNERATION IN FY23
700
31
21
875
791
450
23
14
562
449
£000s
Mike Edwards
Total remuneration
2,418
£000s
2023
2022
Base salary
700
529
Benefits
31
26
Pension entitlements
21
76
STIP
875
165
LTIP
1
791
0
Total
2,418
796
£000s
Ben Waldron
Total remuneration
1,498
£000s
2023
2022
Base salary
450
410
Benefits
23
23
Pension entitlements
14
12
STIP
562
128
LTIP
1
449
0
Total
1,498
573
1
Mike Edwards’ and Ben Waldron’s FY23 remuneration total includes values for both the Covid-delayed 2020 LTIP and the 2021 LTIP.
REVIEW OF DIRECTORS’ REMUNERATION POLICY
The 2021 Directors’ Remuneration Policy has reached the
end of its three-year life and a new policy will be put
forward for a shareholder vote at the 2024 Annual General
Meeting. The Committee undertook a comprehensive
review including a number of stakeholder meetings and
concluded that the policy remains appropriate and that
there should be no material change to the structure of
packages and incentives. Some modest changes primarily
aimed at promoting further clarity in how the policy
operates have been made and these are described in this
2024 Directors’ Remuneration Policy section.
HOW THE COMMITTEE WILL APPLY THE
REMUNERATION POLICY IN 2024
The Committee intends to operate the Remuneration
Policy for Executive Directors for 2024 as follows:
•
The CEO’s salary will increase by 4.0% to £728,000 and
the CFO’s salary by 4.0% to £468,000 which is below the
workforce rate, effective 1 January 2024.
•
Executive Director employer pension contributions will
continue to be aligned with the workforce rate at 3%.
•
STIP opportunities will remain at 125% of salary for the
CEO and CFO which is below the overall Policy limit of
150% of salary. The STIP measures will be: 75% based on
Group adjusted EBIT, 12.5% on UK employee turnover and
12.5% on UK food waste. UK food waste has been introduced
as an additional measure alongside employee turnover in
line with our ESG objectives to support focus on this
important area. These criteria also apply to the broader
workforce in the UK who are eligible for the STIP, covering
c.1,300 colleagues. Regional profit performance is
assessed where relevant in the US and China.
•
It is expected that LTIP awards will be granted in 2024 at
150% of salary to the CEO and CFO. The measures will
be: 45% on relative TSR, 40% on EPS targets and 15% on
carbon emissions. As part of our updated climate
ambition within our ESG Trusted Partner strategy and
our Net Zero aligned target of reducing Scope 1 and 2
emissions, we have decided to add a carbon emissions
measure to our LTIP for 2024.
ALIGNMENT WITH THE CODE AND
STAKEHOLDER FEEDBACK
In designing the 2024 Remuneration Policy, the Committee
once again considered the key themes set out in the 2018 UK
Corporate Governance Code – clarity, simplicity, risk,
predictability, proportionality and alignment to culture. The
Committee has addressed each of these in determining the
remuneration outcomes for 2023 and the approach to paying
our Executives in 2024. The Committee is confident that the
policy has operated in FY23 as intended and remuneration
and company performance have been appropriately aligned.
In this light the Committee has not made any discretionary
amendments to any remuneration outcomes.
The Committee is keen to take the views of employees on
pay into account when making decisions on the Directors’
Remuneration Policy and recognises this as an important
input into discussions. The Bakkavor Board operates with a
Non-executive Director tasked with workforce engagement
and for bringing colleague views to the Group Board.
Sanjeevan Bala undertakes this role alongside his role as a
Remuneration Committee member. This year an update and
Q&A session with Sanjeevan was convened at our Group
Employee Forum ‘workforce engagement session’ and
included a segment on how Executive remuneration aligns
with Bakkavor’s wider pay policies. Sanjeevan was able to
update the Committee on the discussions from the session
and this informed our review of the Directors’
Remuneration Policy.
The Remuneration Committee was pleased to note the
very high level of shareholder support for the 2022
remuneration report at the 2023 AGM, with 99.9% of votes
in favour. This year there will be two votes on remuneration
at the 2024 AGM, being the normal annual advisory vote
on Directors’ remuneration and a second vote to approve
the new Directors’ Remuneration Policy. I hope you will
be supportive of both resolutions.
Jill Caseberry
Chair, Remuneration Committee
4 March 2024
Bakkavor Group plc | Annual Report & Accounts 2023 |
127
DIRECTORS’ REMUNERATION REPORT
CONTINUED
The 2024 Directors’ Remuneration Policy
The Remuneration Policy for the Group was 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 Remuneration Policy will be put to a binding
shareholder vote at the AGM on 23 May 2024 and, subject to
its approval, will be effective until the 2027 AGM (or until
another Remuneration Policy is approved, if sooner).
KEY CONSIDERATIONS WHEN 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 Committee
is mindful of the views of a broad range of stakeholders in
the business and accordingly takes account of a number of
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 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
Senior Executive Team 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 STIP
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.
KEY CHANGES TO THE DIRECTORS’ REMUNERATION
POLICY
The Committee concluded that the Remuneration Policy
remains appropriate and that there should be no material
change to the structure of packages and incentives. In
order to promote further clarity in how the policy operates,
the following modest changes have been made:
•
References to the former CEO’s and the COO’s STIP
opportunity have been removed following their change
of roles and the STIP maximum wording has been
simplified, referring to a STIP opportunity of 150% of
salary (which is unchanged from the previous policy).
•
References to the CFO’s and COO’s LTIP award policy
has been removed following their change of roles and
the LTIP maximum wording has been simplified,
referring to an overall LTIP grant maximum of 200% of
salary (which is unchanged from the previous policy).
•
For LTIP awards, the wording has been changed to
provide greater flexibility on introducing measures other
than relative TSR and EPS growth.
•
As stated in last year’s remuneration report, Lydur
Gudmundsson’s consultancy agreement has now ceased
and therefore is not included in the new policy.
•
To provide clarification in the recruitment policy, that in
the case of a new recruit who joins Bakkavor as an
Executive Director following any acquisitions we
undertake, awards held at his or her former employer
may be rolled over into awards over Bakkavor shares.
•
To include details of how unvested share awards are
treated in the event of a change of control.
128
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STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
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 or to
address salaries that have fallen behind
market rates.
In addition, a higher increase may be made
where an individual had been appointed to
a new role at below-market salary whilst
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, including any tax
paid on such expenses.
Executive Directors may become
eligible for other benefits which are
introduced for the wider workforce
on broadly similar terms.
There is no maximum cap on the value
of benefits. 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.
Bakkavor Group plc | Annual Report & Accounts 2023 |
129
DIRECTORS’ REMUNERATION REPORT
CONTINUED
Purpose and link
to strategy
Operation
Maximum opportunity
Performance metrics
Pension
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.
Existing Executive Directors receive
company pension contributions in line with
the workforce rate (which is currently 3%
of base salary) and 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”)
The STIP 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 STIP shares
provides a retention
element and alignment
with shareholders.
STIP awards are determined
based on measures and
targets that are agreed by the
Remuneration Committee. STIP
measures are typically based on
performance over the relevant
financial year.
Up to two-thirds of the STIP will
be payable in cash, typically in
March following the end of the
financial year.
At least one-third of the STIP is
compulsorily deferred in shares
for three years under the
Deferred STIP.
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.
STIP payments, including
deferred awards, are subject
to recovery and withholding
provisions (see ‘Recovery and
withholding’ in the Notes to the
Policy table for further detail).
The maximum STIP opportunity is 150%
of salary for Executive Directors.
The STIP opportunity for FY2024 is 125%
of salary and any increase to this limit
during the remaining years of this policy
will be subject to prior consultation with
shareholders.
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 STIP 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 STIP 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 STIP 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, if possible, seek
to consult with leading investors
if appropriate before any exercise
of its discretion to increase the
STIP outcome.
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STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
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 will normally be 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.
Awards are subject to recovery
and withholding provisions (see
‘Recovery and withholding’ in
the Notes to the policy table for
further detail).
The individual plan limit is 200% of base
salary in any financial year.
The maximum opportunity for 2024 is
150% of salary and any increase to this
grant level during the remaining years
of this policy will be subject to prior
consultation with shareholders.
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 or other
relevant measures aligned with
delivering Group strategy. 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.
Typically, 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.
All-colleague share schemes
Encourages colleague
share ownership and
therefore increases
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.
Bakkavor Group plc | Annual Report & Accounts 2023 |
131
DIRECTORS’ REMUNERATION REPORT
CONTINUED
Purpose and link
to strategy
Operation
Maximum opportunity
Performance metrics
Share ownership guidelines
Encourages 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
remain subject to a performance
condition are not included.
Unvested Deferred STIP 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 acquired from
share plan awards granted before the
approval of this policy).
Not performance-related.
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-executive Directors
ordinarily do not participate in any
pension, STIP 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.
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 remuneration report for the
relevant financial year.
Not performance-related.
No recovery or withholding
provisions apply.
132
| Bakkavor Group plc | Annual Report & Accounts 2023
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
NOTES TO THE REMUNERATION POLICY TABLE
Recovery and withholding
Awards under the STIP, the Deferred STIP (”DSTIP”) and the
LTIP are subject to recovery and withholding provisions which
permit the Remuneration Committee, at its discretion, to
reduce the size of any future award 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, or where there has
been corporate failure or reputational damage.
In respect of cash award payments under the STIP, the
recovery and withholding provisions apply for one year from
the date of payment of the award (or, if later, the date of
publication of the Company’s financial results for the year
following the relevant year over which the award was earned).
In respect of share awards under the DSTIP and the LTIP, the
recovery and withholding provisions apply up until the third
anniversary of the date on which the relevant award vests,
although the 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 Committee to operate the
recovery and withholding provisions.
Performance conditions
The choice of performance metrics applicable to the
STIP reflect the 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 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 STIP
scheme will normally be set out in the Annual Report on
a prospective basis, subject to limitations with regard to
commercial sensitivity. The full details of the targets will
normally 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 Committee has retained flexibility on
the measures which will be used with the award cycles
over the life of the Policy to ensure that the measures are
fully aligned with the strategy prevailing at the time the
awards are granted. The Committee will review the
calibration of targets applicable to the STIP 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 employees
The overall approach to reward for employees 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 Committee
pays close attention to pay and employment conditions
across the wider workforce and increases for Executive
Directors will be set in the context of increases for the
general workforce.
The STIP cascades down the business and covers c.1,300
employees with payouts usually based on the same
measures and targets applying to Executive Directors.
The STIP opportunity varies by employee grade.
A key difference between the remuneration of Executive
Directors and that of our other employees 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 to a group
of senior leaders below Executive Directors, as they
are reserved for those considered to have the greatest
potential to influence overall levels of performance.
Restricted share awards are granted to some non-Director
level employees to aid retention.
Committee discretion in operation of variable pay schemes
The Committee operates under the powers it has been
delegated by the Board. In addition, it complies with rules
that are either subject to shareholder approval (Long-Term
Incentive Plan and DSTIP) or to approval by the Board
(annual performance STIP scheme). These rules provide the
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
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 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 or other
corporate events.
Bakkavor Group plc | Annual Report & Accounts 2023 |
133
DIRECTORS’ REMUNERATION REPORT
CONTINUED
•
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.
•
Determining ‘good leaver’ status for incentive plan
purposes and applying the appropriate treatment.
•
Undertaking the annual review of performance
measures including their weightings and setting targets
for the STIP and other incentive schemes, where
applicable, from year to year.
If an event occurs which results in the STIP or LTIP
performance conditions and/or targets being deemed
no longer appropriate (e.g. material acquisition or
divestment), the 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 Committee may approve
payments to satisfy commitments agreed prior to the
approval of this Directors’ Remuneration Policy, including
prior 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 Committee may also approve payments outside
this Remuneration Policy in order to satisfy legacy
arrangements made to an employee prior to (and not in
contemplation of) promotion to the Board.
This includes restricted share awards (being share awards
without any performance criteria) which were granted to
below Board employees who have subsequently been
appointed to the Bakkavor Board. All historic awards that
were granted prior to the approval of this Directors’
Remuneration 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 2024 remuneration package for each Executive Director under four
performance scenarios, which are based on the Remuneration Policy set out above.
0
500
1,000
1,500
2,000
2,500
3,000
3,500
Max with growth
Maximum
On-target
Minimum
Max with growth
Maximum
On-target
Minimum
Long-term incentive
Annual bonus
Fixed
Share price growth
CEO
£000s
CFO
100%
£781
52%
£1,509
28%
£2,783
24%
30%
18%
33%
27%
39%
33%
16%
£3,329
100%
£505
52%
£973
28%
£1,792
24%
30%
18%
33%
27%
39%
33%
16%
£2,143
Assumptions:
Performance scenario
Minimum
Target
Maximum
Maximum with share price growth
Base salary
As at 1 January 2024
Benefits
Estimated value for 2024
based on 2023 actual value
Pension
3% of salary
STIP
0% of maximum
50% of maximum
100% of maximum
(being 125% of salary)
LTIP
0% of maximum
25% of maximum
100% of maximum
(being 150% of salary)
As per the maximum, plus a 50%
share price increase over three
years is assumed
134
| Bakkavor Group plc | Annual Report & Accounts 2023
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
RECRUITMENT POLICY
Where it is necessary to appoint or replace an Executive
Director, the 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
Committee will not pay more than is necessary to facilitate
recruitment. 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:
Base salary
The Committee will set a base salary appropriate to
the calibre, experience and responsibilities of the new
appointee. In arriving at a salary, the 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 Board.
The 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 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 normally be consistent with the principles
of the Policy set out in the Policy table. 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.
STIP
The maximum STIP opportunity is 150% of base salary.
LTIP
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 Committee may offer
additional cash and/or share-based elements in order to
‘buy out’ remuneration relinquished on leaving a former
employer. In the event of Bakkavor acquiring or merging
with a business, awards held at the former employer
may be rolled over into awards over Bakkavor shares.
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 STIP/
LTIP performance measures and targets from those
applicable to other Executive Directors.
Any incentive awards granted to employees prior to their
promotion to the 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 loss-of-office payments
The Group’s policy on remuneration for Executive Directors
who leave the Group is consistent with general market
practice. The 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. 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.
Bakkavor Group plc | Annual Report & Accounts 2023 |
135
DIRECTORS’ REMUNERATION REPORT
CONTINUED
The Committee may agree payments it considers
reasonable in settlement of potential 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.
Ordinarily, Executive Directors have no entitlement to a
STIP 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 STIP would otherwise be paid. However,
they may be considered for a STIP payment by the
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 STIP 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 STIP payment to be
deferred into an award over shares under the Deferred
STIP. 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 STIP (“DSTIP”)
As a general rule, a DSTIP 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.
LTIP
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 an employee 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 an employee
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.
In the event of a change of control, in accordance with the
relevant scheme rules:
•
Unvested DSTIP awards will vest on the date of a change
of control; and
•
Unvested LTIP awards will vest on the date of a change
of control, to the extent to which performance conditions
have been satisfied and after a pro-rata reduction for time
elapsed during the three-year 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.
136
| Bakkavor Group plc | Annual Report & Accounts 2023
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
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 (see above). 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
Mike Edwards
4 September
2001
28 September
2022
12 months
either party
Ben Waldron
1 June 2011
12 October
2020
12 months
either party
Policy on external appointments
The 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 Board and the Director may retain any fees received
at the discretion of the Board. No Executive Director
currently holds any external non-executive directorships.
Non-executive 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, unless
exceptional circumstances apply. 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 holding office at the FY23
year end 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
Sanjeevan Bala
1 August 2021
5 July 2021
Umran Beba
1 September 2020
1 September 2020
Jill Caseberry
1 March 2021
24 February 2021
Patrick Cook
12 July 2018
12 July 2018
Agust Gudmundsson
1 August 1986
(founder)
28 September 2022
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
The Chairman, in consultation with the Executive Directors,
is responsible for proposing changes to the Non-executive
Directors’ fees. The 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.
Consideration of shareholders’ views
The 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 our 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 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.
Consideration of employment conditions
The Committee is updated throughout the year on pay
and conditions applying to Group employees, including
any significant changes to employment conditions.
Whilst the Committee does not currently consult directly
with employees regarding its policy for Directors, it has
considered the provisions in the UK Corporate Governance
Code 2018. As a result, it has formalised a number of
existing initiatives to ensure that the ‘employee voice’ is
heard in the boardroom, for example through attendance
at Employee Forum meetings and through updates on pay
and engagement survey scores.
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 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, this
ensures that Executives have a strong alignment with
shareholders through the Company’s share price.
Given the modest changes being proposed, shareholders
were not consulted on the new Policy.
Bakkavor Group plc | Annual Report & Accounts 2023 |
137
DIRECTORS’ REMUNERATION REPORT
CONTINUED
Annual report
on remuneration
This section 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 23 May 2024.
This part of the report comprises five sections:
A. Remuneration for 2023
B. Directors’ share ownership and share interests
C. Pay comparison
D. Remuneration Committee membership, governance and voting
E. Implementation of Remuneration Policy in 2024
A. Remuneration for 2023
SINGLE TOTAL FIGURE OF DIRECTORS’ REMUNERATION (AUDITED)
The total remuneration of the individual Directors who served during the financial year is shown below.
£000s
Base
salary/fee
Benefits
4
Pension
5
Total fixed
remuneration
STIP
LTIP
6
Total variable
remuneration
Total
remuneration
Executive Directors
Mike Edwards
1
2023
700
31
21
752
875
791
1,666
2,418
2022
529
26
76
631
165
–
165
796
Ben Waldron
2023
450
23
14
487
562
449
1,011
1,498
2022
410
23
12
445
128
–
128
573
Agust Gudmundsson
1
2023
–
–
–
–
–
–
–
–
2022
659
26
20
705
132
–
132
837
Non-executive Directors
Simon Burke
(Chairman)
2023
211
–
–
211
–
–
–
211
2022
211
1
–
212
–
–
–
212
Sanjeevan Bala
2023
74
1
–
75
–
–
–
75
2022
74
–
–
74
–
–
–
74
Umran Beba
2023
74
6
–
80
–
–
–
80
2022
74
5
–
79
–
–
–
79
Jill Caseberry
2023
74
1
–
75
–
–
–
75
2022
74
1
–
75
–
–
–
75
Patrick Cook
2
2023
–
–
–
–
–
–
–
–
2022
–
–
–
–
–
–
–
–
Agust Gudmundsson
1
2023
74
3
–
77
-
–
–
77
2022
12
–
–
12
–
–
–
12
Lydur Gudmundsson
3
2023
74
–
–
74
–
–
–
74
2022
277
1
–
278
–
–
–
278
Denis Hennequin
2023
74
–
–
74
–
–
–
74
2022
74
–
–
74
–
–
–
74
Jane Lodge
2023
74
2
–
76
–
–
–
76
2022
74
2
–
76
–
–
–
76
Total
2023
1,879
67
35
1,981
1,437
1,240
2,677
4,658
2022
2,468
85
108
2,661
425
–
425
3,086
Notes to the remuneration table:
1
Agust Gudmundsson retired as CEO on 31 October 2022 and became a Non-executive Director of the Group from 1 November 2022. Mike Edwards was promoted from COO, UK to
CEO from 1 November 2022.
2
Patrick Cook does not receive a fee for his services.
3
Lydur Gudmundsson’s Non-executive Director base fee is £73,903 p.a. In FY22, Lydur Gudmundsson provided consulting services to the Group and this agreement ceased with
effect from 31 December 2022.
4
Relates to taxable benefits: For Executive Directors, benefits comprised car allowance, fuel, benefit allowance and family private medical cover. For Non-executive Directors,
benefits values (including those grossed up for tax purposes) are for reasonable expenses related to business-related travel and accommodation only, with the exception of Lydur
Gudmundsson who was also entitled to medical cover in the UK for the benefit of his family which ceased on 31 December 2022.
5.
The amounts in the table above relate solely to salary supplements in lieu of pension. Mike Edward’s pension contribution decreased from 20% to 3% in line with the workforce rate
upon his promotion from COO, UK effective 1 November 2022. No Directors are accruing pension contributions under a money purchase pension scheme. In addition however, Mike
Edwards is a member of the Group’s UK defined benefit scheme but no longer accrues any pension benefits under the scheme. The value of his legacy benefit is shown on pg 140.
6
This comprises the value of two sets of LTIP awards (2020 and 2021). Mike Edwards and Ben Waldron received performance share awards in October 2020 under the LTIP prior to their
joining the Board as Executive Directors. These awards vested in full in October 2023 based on achievement of a relative TSR condition measured over a three-year period from the date
of grant. After joining the Board, they received a grant of performance shares in April 2021 and these were subject to a relative TSR measure and EPS targets. These awards will vest at
50% on 26 April 2024 and will be subject to a two-year holding period. Both sets of awards have been included in the LTIP column of the total single figure table for 2023. The total value
of the October 2020 award included in the LTIP column for Mike Edwards is £504,426 (of which £85,716 relates to dividend equivalent payments and of which £117,791 is attributable to
share price growth over the period from the date of grant to the vesting date) and for Ben Waldron is £228,393 (of which £38,810 relates to dividend equivalent payments and of which
£53,333 is attributable to share price growth over the period from the date of grant to the vesting date). This has been calculated using a share price at the date of vesting of 91.0 pence.
The total value of the April 2021 award included in the LTIP column for Mike Edwards is £286,196 (of which £48,633 relates to estimated dividend equivalents) and for Ben Waldron is
£220,107 (of which £37,402 relates to estimated dividend equivalents). For the purpose of this table the values of the April 2021 awards have been calculated using an average share price
over the three-month period from 1 October 2023 to 30 December 2023 of 87.04 pence (and as this is lower than the share price at grant there is no value for this award attributable to
share price growth). No discretion was applied by the Committee in determining the vesting outcomes.
138
| Bakkavor Group plc | Annual Report & Accounts 2023
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
2023 STIP OUTCOME (AUDITED)
In 2023, c.1,300 colleagues were eligible for a STIP, subject to meeting the same performance objectives, established at
the beginning of the financial year by reference to suitably challenging corporate goals over the 12-month period. In 2023,
the STIP targets and performance-related outcomes were as follows:
Metrics
Weighting
Threshold
1
(20%/0%)
Maximum
(100%)
Actual
performance
%
outcome
Group adjusted EBIT
75%
£83m
£93m
£94.3m
100%
UK employee turnover
25%
28.1%
26.7%
26.2%
100%
Total (% of max)
100%
1
Under the EBIT measure, 20% is payable for achieving threshold and under the employee turnover metric, threshold results in 0% payout. Under both measures, STIP accrues on a
straight-line basis between threshold and maximum.
As set out in the Annual Statement, the Committee considered carefully whether the level of payment was appropriate or
whether any adjustment or use of negative discretion was required but felt that a STIP outcome of 100% of the maximum
was appropriate. On balance, the Committee is confident that the 100% payout fairly reflects the strong performance
across both measures in what was a challenging 2023 and took into account the following factors in making its decision on
2023 STIPs:
•
The Group delivered a solid financial performance against a challenging backdrop, with further significant inflation
across the cost base and continued pressure on household budgets, which has impacted consumer behaviour.
•
The balance sheet remains robust, with leverage at the bottom end of the target range and significant liquidity headroom
on debt facilities.
•
Total FY23 dividend of 7.28 pence per Ordinary share, an increase of 5% on FY22.
•
Improvement in all strategic focus areas for ESG and an increase in our overall engagement score from our Employee
Engagement Survey for 2023.
Maximum STIP
opportunity
(% of salary)
STIP payout
(% of maximum)
STIP earned (£000s)
Mike Edwards
125%
100%
875
Ben Waldron
125%
100%
562
Two-thirds of the STIP earned will be paid in cash and the remaining one-third will be deferred in shares under the DSTIP
for three years. There are no performance conditions attached to the vesting of deferred shares and these awards vest
subject to continued employment.
2020 LTIP (AUDITED)
Prior to their joining the Group Board, Mike Edwards was granted awards over 460,121 performance shares and 230,060
restricted shares and Ben Waldron was granted awards over 208,333 performance shares and 104,166 restricted shares
under the LTIP on 14 October 2020 which vested on 14 October 2023. The performance share awards were based 100% on
relative TSR targets measured over a three-year period ending on 13 October 2023 and vested in full and the restricted share
awards were subject to a service condition only. These awards were not subject to a further two-year holding period.
PERFORMANCE SHARE AWARDS – VESTING
Threshold
(25% vesting)
Maximum
(100% vesting)
Actual
Vesting
(% of maximum)
Relative TSR
1
(100%)
Median rank
Upper quartile
rank or higher
80.4% TSR, ranked
in upper quartile
100%
1
TSR is measured over the three-year period commencing from 14 October 2020 against the following companies: Associated British Foods, A.G Barr, Britvic, Coca-Cola HBC,
Compass Group, Cranswick, Diageo, Domino’s Pizza Group, DP Eurasia NP, Fuller Smith & Turner, Greencore Group, Greggs, Hilton Food Group, JD Wetherspoon, J Sainsbury,
Marston’s, Mitchells & Butlers, Ocado Group, Premier Foods, Restaurant Group, SSP Group, Tate & Lyle, Tesco, Unilever and Whitbread.
Performance share awards granted to below Board employees were subject to a cap on vesting of £1.80. As the share
price was less than £1.80 upon vesting, the cap was not enforced. The awards, consistent with the term of such awards
granted to all below Board participants at the time, were not subject to a windfall gain adjustment provision.
TSR performance was such that the performance share award vested at 100% of the maximum and the Committee approved
the vesting at this level. Consideration was given to the business performance over this period and with the positive progress
on Group sales, Group EBIT, Group ROIC, net debt, leverage and ESG KPIs, the 100% vesting was felt appropriate.
Bakkavor Group plc | Annual Report & Accounts 2023 |
139
DIRECTORS’ REMUNERATION REPORT
CONTINUED
2021 LTIP (AUDITED)
On 26 April 2021, Mike Edwards (in his role as UK COO) was granted awards over 545,872 shares and Ben Waldron (in his role
as CFO) was granted awards over 419,818 shares which will vest on 26 April 2024. The performance shares were based on
adjusted earnings per share (EPS) and total shareholder return (TSR) performance conditions, each with an equal weighting.
The performance period for both measures ended in December 2023 and the awards will ordinarily become exercisable on
the third anniversary of grant subject to continued service. These awards are subject to a two-year holding period.
Threshold
(25% vesting)
Maximum
(100% vesting)
Actual
Vesting
(% of maximum)
Relative TSR
1
(50%)
Median rank
Upper quartile
rank or higher
Above upper
quartile ranking
100%
EPS (50%)
12.7p
14.7p or higher
8.8p
0%
1
TSR is measured over the three-year period commencing from the start of FY21 against the following companies: Associated British Foods, A.G Barr, Britvic, Coca-Cola HBC,
Compass Group, Cranswick, Diageo, Domino’s Pizza Group, Fuller Smith & Turner, Greencore Group, Greggs, Hilton Food Group, JD Wetherspoon, J Sainsbury, Marston’s, Mitchells
& Butlers, Ocado Group, Premier Foods, SSP Group, Tate & Lyle, Tesco, Unilever and Whitbread.
The EPS performance over the period was such that there was no vesting in relation to this part of the award. This reflected
higher inflation, higher interest rates and lower UK volumes than had been anticipated when the targets were agreed. For
TSR, the Company finished in the upper quartile of the comparator group and therefore for this element, 100% will vest. As
such, for Mike Edwards the number of shares vesting will be 272,936 and for Ben Waldron it will be 209,909. Performance
share awards were subject to a cap on vesting of £3.60; however, as the share price was below the cap, the cap was not
exceeded. Awards are subject to a post-vesting holding period and shareholding guidelines as per the Remuneration Policy.
As a consequence of the pandemic the 2020 LTIP awards were granted later than the usual April grant date and therefore
there was no value assigned in respect of the 2020 LTIP in the 2022 single total figure of remuneration. The 2023 single
total figure of remuneration therefore includes both the 2020 and 2021 LTIPs.
PAYMENTS TO FORMER DIRECTORS AND LOSS OF OFFICE PAYMENTS (AUDITED)
Peter Gates retired from the Group Board on 26 December 2020. He was granted awards over 1,118,051 performance
shares (market value £718,012) under the LTIP on 15 September 2020 based 100% on relative TSR targets measured over
a three-year period ending 14 September 2023. The TSR outcome has been tested and Bakkavor ranked in the upper
quartile of the peer group and therefore a 100% performance vesting level was achieved. The awards were pro-rated to
reflect Peter’s service during the three-year vesting period and, accordingly, 126,697 awards vested (inclusive of accrued
dividend equivalents). The vesting outcome was considered in relation to whether there should be any reduction to the
vesting level to take into account any windfall gains. Having given serious consideration to this in the context of business
performance over the three-year period, it was determined there would be no reduction. The Committee took into account
the factors set out above in determining the previous CFO’s vested awards, the size of the vested award after the pro rata
reduction to reflect just over three months’ employment during the 36-month vesting period and the overall experience
and treatment of employees, customers and suppliers during the three-year period. Separately, in line with the LTIP rules,
a two-year holding period applies to this vested award.
There were no payments to any Directors for loss of office in the year (2023).
PENSIONS DISCLOSURE (AUDITED)
During 2023 Mike Edwards received a non-pensionable salary supplement equal to 3% of pensionable earnings, in line
with the workforce rate. Mike is, in addition, a deferred member of the Bakkavor Pension Scheme (“the Scheme”) but no
longer accrues a pension benefit under the Scheme. The value of the legacy benefit is shown below:
Executive Director
Defined benefit pension accrued at
30 December 2023
Defined benefit pension accrued at
31 December 2022
Mike Edwards
£43,183
£39,492
Mike’s accrued pension ceased to be linked to salary from 31 March 2011 and now increases in line with the standard
provisions that apply to all deferred members in the Scheme. No additional amount is due in the event of early retirement.
The normal retirement age under the Scheme is 65.
140
| Bakkavor Group plc | Annual Report & Accounts 2023
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
B. Directors’ share ownership and share interests
LTIP AND DEFERRED STIP AWARDS GRANTED IN 2023 (AUDITED)
On 12 April 2023 the following awards, structured as nil-cost options, were made under the LTIP to Executive Directors:
Date of grant
Basis of award
(% of salary)
Face value of
awards at grant
1
Number of shares
under award
Date of
vesting
Mike Edwards
12 April 2023
150%
£1,049,999
1,034,482
12 April 2026
Ben Waldron
12 April 2023
150%
£674,999
665,024
12 April 2026
1
Based on the three-day average share price of £1.015 to 11 April 2023. 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 Committee was comfortable that the EPS range was adjusted down to take account of the increase
in corporation tax alongside higher interest rates. The performance period for both measures ends on 27 December 2025.
Relative TSR
1
Earnings per share (for FY25)
Portion of award vesting
Below median
Less than 10.0p
0%
Median
10.0p
25%
Between median and upper quartile
Between 10.0p and 11.5p
Pro-rata on straight-line basis between 25% and 100%
Upper quartile
11.5p
100%
1
TSR is measured over the three-year period commencing from the start of FY23 against the following companies: Associated British Foods, A.G Barr, Britvic, Coca-Cola HBC,
Compass Group, Cranswick, Devro, Diageo, Domino’s Pizza Group, DP Eurasia NP, Fuller Smith & Turner, Greencore Group, Greggs, Hilton Food Group, JD Wetherspoon,
J Sainsbury, Marston’s, Mitchells & Butlers, Ocado Group, Premier Foods, Restaurant Group, SSP Group, Tate & Lyle, Tesco, Unilever and Whitbread.
Awards will be subject to a two-year post-vesting holding period following vesting as well as malus and clawback provisions.
On 12 April 2023, awards were granted under the Deferred STIP calculated as one third of the FY22 STIP as follows:
Date of grant
Form of award
Face value of
awards at grant
1
Number of shares
under award
Date of
vesting
Mike Edwards
12 April 2023
Nil cost option
£55,063
54,249
12 April 2026
Ben Waldron
12 April 2023
Nil cost option
£42,674
42,042
12 April 2026
1
Based on the three-day average share price of £1.015 to 11 April 2023.
OUTSTANDING LTIP AND DEFERRED STIP AWARDS (AUDITED)
Details of all outstanding performance share awards (“PSAs”), restricted share awards (“RSAs”) and Deferred STIP
Awards (“DSTIPAs”) held by Executive Directors:
Award type
1
Ex.
price
Grant
date
Interest at
1 Jan 2023
Awards
granted
in year
Awards
vested
in year
Awards
exercised
in year
Awards
lapsed
in year
Dividend
equivalents
Interest at
30 Dec
2023
2
Date of
vesting
Mike
Edwards
LTIP 2017
£0
1 July 2017
600,000
–
–
–
–
–
600,000
1 April 2020
LTIP 2017
£0
1 July 2017
400,000
–
–
–
–
–
400,000
1 April 2022
LTIP 2018 RSA
£0
9 April 2018
81,385
–
–
–
–
5,148
86,533
9 April 2021
LTIP 2019 RSA
£0
9 April 2019
118,094
–
–
–
–
12,427
130,521
9 April 2022
LTIP 2020 PSA
£0
14 Oct 2020
460,121
–
460,121
–
–
94,193
554,314
14 Oct 2023
LTIP 2020 RSA
£0
14 Oct 2020
230,060
–
230,060
–
–
47,096
277,156
14 Oct 2023
LTIP 2021 PSA
£0
26 Apr 2021
545,872
–
–
–
–
–
545,872
26 Apr 2024
LTIP 2022 PSA
£0
13 Apr 2022
680,889
–
–
–
–
–
680,889
13 Apr 2025
DSTIP 2022
£0
13 Apr 2022
138,055
–
–
–
–
–
138,055
13 Apr 2025
LTIP 2023 PSA
£0
12 Apr 2023
–
1,034,482
–
–
–
–
1,034,482
12 Apr 2026
DSTIP 2023
£0
12 Apr 2023
–
54,249
–
–
–
–
54,249
12 Apr 2026
Ben
Waldron
LTIP 2017
£0.764
1 July 2017
134,163
–
–
–
–
–
134,163
1 April 2020
LTIP 2020 PSA
£0
14 Oct 2020
208,333
–
208,333
–
–
42,648
250,981
14 Oct 2023
LTIP 2020 RSA
£0
14 Oct 2020
104,166
–
104,166
–
–
21,324
125,490
14 Oct 2023
LTIP 2021 PSA
£0
26 Apr 2021
419,818
–
–
–
–
–
419,818
26 Apr 2014
LTIP 2022 PSA
£0
13 Apr 2022
559,228
–
–
–
–
–
559,228
13 Apr 2025
DSTIP 2022
£0
13 Apr 2022
106,175
–
–
–
–
–
106,175
13 Apr 2025
LTIP 2023 PSA
£0
12 Apr 2023
–
665,024
–
–
–
–
665,024
12 Apr 2026
DSTIP 2023
£0
12 Apr 2023
–
42,042
–
–
–
–
42,042
12 Apr 2026
1
Ben Waldron and Mike Edwards received restricted share awards in their roles as Senior Executives prior to joining the Group Board.
2
Dividend equivalents added for all vested but unexercised LTIP awards (excluding 2017 pre-IPO LTIP) in ‘Interest at 30 December 2023’ column.
Bakkavor Group plc | Annual Report & Accounts 2023 |
141
DIRECTORS’ REMUNERATION REPORT
CONTINUED
STATEMENT OF DIRECTORS’ SHAREHOLDINGS AND SHARE INTERESTS (AUDITED)
The share interests of each Director as at 30 December 2023 (together with interests held by connected persons) are set out
in the table below. To align Executives with 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 STIP and post-IPO LTIP awards (net of any taxes due) until this guideline is met.
Shareholdings for Directors who have held office during the year ended 30 December 2023 are set out as a percentage
of salary or fees in the table below. There were no options exercised during the year by Directors. During the period from
30 December 2023 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
30 December
2023
Beneficially
owned shares
31 December
2022
Vested but
unexercised
share awards
Unvested
share awards
– LTIP
Unvested
share awards
– DABP
Total interests
held at
30 December
2023
Shareholding
as a %
of salary
2
Executive Directors
Mike Edwards
–
–
2,048,524
2,261,243
192,304
4,502,071
76.1%
1
Ben Waldron
59,902
59,902
510,634
1,644,070
148,217
2,362,823
60.8%
1
Non-executive Directors
Simon Burke
(Chairman)
65,000
50,000
–
–
–
65,000
n/a
Sanjeevan Bala
–
–
–
–
–
–
–
Umran Beba
–
–
–
–
–
–
–
Jill Caseberry
–
–
–
–
–
–
–
Patrick Cook
–
–
–
–
–
–
–
Agust Gudmundsson
142,103,505
142,103,505
–
–
–
142,103,505
n/a
Lydur Gudmundsson
142,303,505
142,303,505
–
–
–
142,303,505
n/a
Denis Hennequin
–
–
–
–
–
–
–
Jane Lodge
50,000
50,000
–
–
–
50,000
n/a
1
Calculation based on share price of £0.810 as at 30 December 2023.
2
Unvested shares or share options which are subject to a performance condition do not count towards the in-employment guideline. Unvested deferred STIP 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.
C. Pay comparison
PERCENTAGE CHANGE IN DIRECTORS’ REMUNERATION VERSUS EMPLOYEE PAY
The table below shows the percentage change in salary, benefits and STIP earned between the 2023 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 three years. Whilst 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.
2023
2022
2021
2020
Salary/
fees Benefits
STIP
Salary/
fees Benefits
STIP
Salary/
fees Benefits
STIP
Salary/
fees Benefits
STIP
Mike Edwards
32.3%
19.2%
430%
10.0%
-16.1%
-63.4%
n/a
n/a
n/a
n/a
n/a
n/a
Ben Waldron
9.8%
0%
340%
10.8%
91.7%
-63.1%
n/a
n/a
n/a
n/a
n/a
n/a
Simon Burke (Chairman)
1
0%
-100%
n/a
2.75%
n/a
n/a
2.75%
-100%
n/a
0%
n/a
n/a
Sanjeevan Bala
2
0%
100%
n/a
146.3%
0%
n/a
n/a
n/a
n/a
–
–
–
Umran Beba
1
0%
20%
n/a
2.75%
400%
n/a
2.75%
n/a
n/a
0%
n/a
n/a
Jill Caseberry
2
0%
0%
n/a
23.2%
n/a
n/a
n/a
n/a
n/a
–
–
–
Patrick Cook
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
Agust Gudmundsson
1
0%
100%
n/a
-12.7%
18.2%
-71.4%
0%
1000%
n/a
0%
-75%
-100%
Lydur Gudmundsson
1
0%
-100%
n/a
-72.3%
0%
n/a
2.75%
-50%
n/a
0%
-50%
n/a
Denis Hennequin
1
0%
n/a
n/a
2.75%
n/a
n/a
2.75%
n/a
n/a
0%
n/a
n/a
Jane Lodge
1
0%
0%
n/a
2.75%
100%
n/a
2.75%
-66.7%
n/a
0%
100%
n/a
Colleague average
3.9%
n/a
300%
2.9%
0%
-66.7%
2.75%
0%
200%
0%
n/a
61.3
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, whilst the Group’s founders (CEO at the time, 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
NED fees in 2022 comparison are the standard NED fees however the year-on-year numbers vary due to pro-rata calculations using part-year figures from prior year.
142
| Bakkavor Group plc | Annual Report & Accounts 2023
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
CEO PAY RATIO
In line with the reporting regulations, set out below is the ratio of CEO pay compared to the pay of UK full-time equivalent
colleagues of the Group for the financial year ended 30 December 2023. We expect the pay ratio to vary from year to year,
driven largely by variability in incentive outcomes for the CEO, which will significantly outweigh any other general employee
pay changes at Bakkavor. The CEO single total figure remuneration for 2023 of £2,418k is used in the table below. It should
be noted this number is elevated due to the 2023 single total figure including values for both the 2020 and 2021 LTIPs.
Taking this into account, 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.
Method
25th percentile pay ratio
Median pay ratio
75th percentile pay ratio
2023
Option B
102:1
86:1
73:1
2022
Option B
49:1
40:1
40:1
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 key reasons for the significant increase in the pay ratio from full-year ended 2022 is the higher payment for the STIP in
2023 (100% of the maximum) compared to 2022 (25% of the maximum) as well as the vesting of the delayed 2020 LTIP and
2021 LTIP vesting versus no LTIP vesting in 2022. 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.
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. The gender pay gap data from the pay date of 5 April 2023 was used to
identify colleagues at the 25th, 50th and 75th percentiles who are all full time colleagues. Data was analysed for a number of
colleagues around each quartile figure to ensure that there were no anomalies and to ensure an appropriate representation
of P25, P50 and P75. Remuneration for each of these individuals was then re-calculated for FY23, as at 30 December 2023,
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
£22,914
£28,136
£32,178
Total pay and benefits
£23,602
£28,136
£33,180
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 30 December 2023. 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.
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
30 Dec
2023
31 Dec
2022
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 (a LSEG product).
Bakkavor Group plc | Annual Report & Accounts 2023 |
143
DIRECTORS’ REMUNERATION REPORT
CONTINUED
CEO SINGLE FIGURE HISTORY
CEO
CEO single figure of total
remuneration £’000
Annual STIP payout as a
proportion of maximum
LTIP vesting as a proportion
of maximum
2023
1
Mike Edwards
2,418
100%
100/50%
2022
2
Mike Edwards
161
25%
n/a
2022
2
Agust Gudmundsson
837
25%
n/a
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
1
The 2023 figure includes both the delayed 2020 and 2021 LTIPs for Mike Edwards which vested at 100% and 50% respectively.
2
The 2022 figures for Mike Edwards and Agust Gudmundsson are based on their respective periods in post as Chief Executive during the 2022 financial year. Agust Gudmundsson
did not participate in the LTIP.
RELATIVE IMPORTANCE OF THE SPEND ON PAY
The following table shows the Company’s actual spend on pay for all Group colleagues relative to dividends:
2023
2022
% change
Staff costs
1
£591.9m
£594.7m
-0.5%
Dividends
£40.8m
£38.8m
5.2%
1
Note 8 of the Financial Statements.
D. Remuneration Committee membership, governance and voting
REMUNERATION COMMITTEE MEMBERSHIP
The Remuneration Committee in 2023 comprised Jill Caseberry as Chair of the Committee, Umran Beba and Sanjeevan
Bala, all independent Non-executive Directors. The Committee met four times during the year and all Committee
members were present. The biographies of the Remuneration Committee members are set out on pg 88.
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”) who act 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 £59,900 excluding VAT during 2023 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 2023.
144
| Bakkavor Group plc | Annual Report & Accounts 2023
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
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 31 May 2023 in respect of the Directors’ remuneration report for the year ended 30 December 2022 and at the
AGM on 20 May 2021 in respect of the previous Directors’ Remuneration Policy:
Remuneration report
At AGM 31 May 2023
Total number
of votes
% of
votes cast
For and Discretionary
1
564,103,863
99.85%
Against
862,259
0.15%
Total votes cast (excluding withheld votes)
564,966,122
100.0%
Total votes withheld
4,145
0.0%
Total votes cast (including withheld votes)
564,970,267
100.0%
1
There were no discretionary votes.
Remuneration Policy
At AGM 20 May 2021
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
100.0%
Total votes withheld
625
0.0%
Total votes cast (including withheld votes)
562,041,314
100.0%
1
13,951 were based on discretionary votes.
E. Implementation of Remuneration Policy in 2024
Mike Edwards
Ben Waldron
Annual base
salary
•
2024: £728,000 (an increase of 4%).
•
From 1 November 2022: £700,000.
(upon promotion to CEO).
•
2024: £468,000 (an increase of 4%).
•
From 1 December 2022: £450,000 (upon promotion
to CFO and Asia CEO and to reflect additional
responsibilities).
•
The average 2024 increase for the UK salaried workforce is c.5.3% with typical increases ranging from
4% to 6%.
Benefits and
pension
•
Pension contribution is workforce aligned at 3% of salary.
•
Benefits are provided in line with the approved Remuneration Policy.
STIP
2024 STIP maximum is 125% of salary.
•
For 2024, the STIP for the Executive Directors will comprise three measures, namely Group adjusted. EBIT
(75%), colleague engagement measured through employee turnover (12.5%) and UK food waste (12.5%).
•
Specific targets have not been disclosed in advance as this would give a clear indication of the Group’s
business objectives, which are commercially sensitive. Full details of the targets and performance
against them will be disclosed in the 2024 Annual Report and Accounts.
•
The employee turnover metric for 2024 will be based on a slightly different methodology which better
enables external comparison. The 2024 targets take into account this new methodology. 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 STIP earned will be deferred for three years,
conditional upon continued employment.
Bakkavor Group plc | Annual Report & Accounts 2023 |
145
DIRECTORS’ REMUNERATION REPORT
CONTINUED
Mike Edwards
Ben Waldron
Long-Term
Incentive
Plan awards
•
The Remuneration Committee intends to grant awards of nil-cost options under the LTIP in April 2024
to the CEO and CFO in line with the Remuneration Policy.
•
Awards will have a face value of up to 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 EPS (40%), relative TSR (measured against a bespoke group of food and
drink companies) (45%) and carbon emissions (15%).
•
The adjusted EPS target requires a minimum performance of 10.0p to trigger threshold vesting (25%
of that element) with performance of 11.5p to achieve maximum. For performance outcomes between
threshold and maximum, the vesting percentage will be determined on the basis of a straight-line sliding
scale. In setting these targets, the Committee took into account the Group’s strategic plan and market
expectations based on analyst forecasts and is confident that the targets are stretching for the three-year
performance period.
•
The relative TSR performance condition is unchanged from the FY23 award with performance assessed
over the period FY24 to FY26, relative to the following bespoke group of sector peers: A.G. Barr,
Associated British Foods, Britvic, Coca-Cola HBC, Compass Group, Cranswick, Devro, Diageo, Domino’s
Pizza Group, DP Eurasia NV, Fuller Smith & Turner, Greencore Group, Greggs, Hilton Food Group, JD
Wetherspoon, J Sainsbury, Marston’s, Mitchells & Butlers, Ocado Group, Premier Foods, Restaurant
Group, SSP Group, Tate & Lyle, Tesco, Unilever (UK) and Whitbread. Performance will need to be median
to trigger threshold vesting (25% of that element) and at least upper quartile to trigger full vesting of that
element. For performance outcomes between threshold and maximum, the vesting percentage will be
determined on the basis of a straight-line sliding scale.
•
The carbon emissions element of our LTIP requires a reduction of 11,100 tonnes to trigger threshold
vesting (25% of that element) with performance of a reduction of 12,210 tonnes to achieve maximum. For
performance outcomes between threshold and maximum, the vesting percentage will be determined on
the basis of a straight-line sliding scale. In setting these targets, the Committee took into account the
Group’s strategic plan for reductions in Scope 1 and 2 emissions by the end of 2026 which is aligned with
the annual decrease required to meet our 2030 target which has been prepared in line with
recommendations from the Science Based Targets initiative (“SBTi”) and is confident that the targets are
stretching for the three-year performance period.
•
In line with our usual approach, a windfall gain assessment will be made at the time of grant. 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.
•
Awards will be subject to a two-year holding period following vesting as well as malus and clawback.
NON-EXECUTIVE DIRECTORS’ FEES FOR 2024
Fees for the Non-executive Directors and Chairman have been increased for FY24 by 4% effective 1 January 2024 and are
as follows:
Fee
Chairman
£219,597
Base Non-executive Director fee
£76,859
Notes:
Patrick Cook did not receive any fees for his role as Non-executive Director.
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
international travel expenses.
On behalf of the Group Board
Jill Caseberry
Chair, Remuneration Committee
4 March 2024
146
| Bakkavor Group plc | Annual Report & Accounts 2023
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
DIRECTORS’ REPORT
The Directors present their report, together with
the audited Group Financial Statements, for the
year ended 30 December 2023.
PRINCIPAL ACTIVITIES AND BUSINESS REVIEW
Bakkavor Group plc produces Fresh Prepared Food
in its three markets: the UK; the US; and China. The
Company employs c.18,000 colleagues worldwide and
is headquartered in London, UK.
DIRECTORS’ REPORT CONTENT
For the purposes of the Companies Act 2006, the
Strategic Report, the corporate governance report and
the Directors’ remuneration report are all incorporated by
reference into, 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 number
10986940. Bakkavor Group plc’s registered office is Fitzroy
Place, 5th Floor, 8 Mortimer Street, London, England, W1T 3JJ.
Our registrars are Equiniti Limited, located at Aspect
House, Spencer Road, Lancing, West Sussex, BN99 6DA.
CORPORATE GOVERNANCE STATEMENT
In compliance with the Financial Conduct Authority’s
(“FCA”) Disclosure Guidance and Transparency Rules
(“DTRs”) Rule 7, the corporate governance statement,
Board Committees’ reports, and Directors’ remuneration
report are included in this Directors’ report.
Our corporate governance statement sets out how the
Group complies with the 2018 UK Corporate Governance
Code (“the Code”). It also explains the composition and
operation of the Group Board and its Committees.
READ MORE:
Corporate governance compliance statement pg 86.
Group Board pg 88.
All required disclosures have been made and the Group has
complied with the Code throughout the accounting period.
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.
READ MORE
pg 64.
STRATEGIC REPORT
Section 414A of the Companies Act 2006 (“the Act”)
requires the Directors to present a Strategic Report
in the Annual Report and Accounts. The Directors
are satisfied with the Group’s net asset position as
at 30 December 2023.
MANAGEMENT REPORT
For the purposes of DTR Rules 4.1.5R (2) and 4.1.8, the
Directors’ report and the Strategic Report 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 encompasses our ESG
strategy, Trusted Partner.
READ MORE
pg 2.
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 pg 217 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 in the
Directors’ report. The table below outlines where further
information on these topics can be found:
Page
Important events since the financial year end
210
Likely future developments in the business
20
Research and development
151
Use of financial instruments
16
Colleague engagement
64
Greenhouse gas emissions
61
Risk management and risks
72
Details of subsidiaries
217
Our Directors ’ report
Bakkavor Group plc | Annual Report & Accounts 2023 |
147
LISTING RULE 9.8.4 DISCLOSURES
In accordance with Listing Rule 9.8.4 of the FCA’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 pg 131 of
Directors’ remuneration
report
(5)
Waiver of emoluments
by a Director
Pg 126 of Directors’
remuneration report
(6)
Waiver of future
emoluments by a Director
Pg 126 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
Pg 150 of Directors’ report
(11)
Provision of services by
a controlling shareholder
Pg 150 of Directors’ report
(12)
Shareholder waivers
of dividends
Not applicable
(13)
Shareholder waivers
of future dividends
Not applicable
(14)
Agreements with
controlling shareholders
Pg 150 of Directors’ report
RESULTS
READ MORE:
Financial review pg 68.
Consolidated income statement pg 166.
DIVIDEND
An interim dividend of 2.91p per Ordinary share was paid on
13 October 2023 to shareholders whose names were in the
register of members as at 15 September 2023. The Group
Board will propose a final dividend of 4.37 pence per
Ordinary share at the Company’s AGM on 23 May 2024. This
will result in a total dividend for the financial year 2023 of
7.28 pence per Ordinary share. Subject to shareholder
approval, the final dividend declared at the AGM will be paid
on 29 May 2024 to shareholders on the register of members
as at close of business on 26 April 2024.
The Group’s profit after tax for the financial year amounts
to £53.9m.
BOARD OF DIRECTORS
The profiles of the Directors of the Company who were
in office during the year and up to the date of signing the
Financial Statements are set out in this report.
READ MORE
pg 88.
An agreed list of matters for the Directors’ consideration
is set out in the Schedule of Matters Reserved to the Group
Board, which is reviewed and updated annually and is
available on the Bakkavor website at bakkavor.com/en/
investors/governance/.
APPOINTMENT AND RETIREMENT OF DIRECTORS
The rules governing the appointment and replacement of
Directors can be found in the Articles, the Code, the Act and
related legislation. Under the Terms of Reference of the
Nomination Committee, the appointment of Directors must
be recommended by the Nomination Committee for
approval by the Group Board. The process for appointment
and removal of Directors is captured in the Terms of
Reference of the Nomination Committee. Pursuant to the
provisions of the Code, at each AGM, all Directors will retire
and stand for election or re-election to the Group Board.
READ MORE
pg 88.
Name
Role
Effective date of
first appointment
Sanjeevan Bala
Independent
Non-executive Director
1 August 2021
Simon Burke
Chairman
20 October 2017
Bob Berlin
Non-independent
Non-executive Director
16 January 2024
Umran Beba
Independent
Non-executive Director
1 September 2020
Jill Caseberry
Independent
Non-executive Director
1 March 2021
Patrick Cook
1
Non-independent
Non-executive Director
12 July 2018
Mike Edwards
Chief Executive Officer
27 December 2020
Agust
Gudmundsson
Non-independent
Non-executive Director
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
and Asia CEO
27 December 2020
1
Patrick Cook stepped down from the Group Board on 16 January 2024.
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.
DIRECTORS’ REPORT
CONTINUED
148
| Bakkavor Group plc | Annual Report & Accounts 2023
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
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.
SERVICE CONTRACTS
The Company’s policy regarding Directors’ service
contracts and appointment terms takes account of market
practice and their notice periods are not excessive.
No Director has a service contract with a notice period
in excess of one year.
DIRECTORS’ INTERESTS IN COMPANY SHARES
Directors’ direct and indirect shareholding interests which
have been notified to the Company as of 30 December 2023
and as at the date of the publication of this report are set
out in the table below. There were no changes to the
shareholding interests between 30 December 2023 and
the date of publication:
30 December 2023
Date of publication
Name
Number of
shares
% of voting
rights
Number of
shares
% of voting
rights
Simon Burke
65,000
0.01%
65,000
0.01%
Agust
Gudmundsson
142,103,505
24.52%
142,103,505
24.52%
Lydur
Gudmundsson
142,303,505
24.56%
142,303,505
24.56%
Jane Lodge
50,000
0.01%
50,000
0.01%
Ben Waldron
59,902
0.01%
59,902
0.01%
ARTICLES OF ASSOCIATION
The Company’s Articles of Association set out the objects
and powers of the Company. 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, bakkavor.com/en/
investors/governance.
SHARE CAPITAL AND CAPITAL STRUCTURE
The Company’s issued share capital as at 30 December
2023 comprised a single class of shares 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.
RESTRICTIONS ATTACHING TO SHARES
In line with the Articles of Association of the Company, 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 regarding 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 2023 AGM to
make market purchases of up to 10% of its issued share
capital as permitted under the Articles. This standard
authority is renewable annually; the Directors will seek
to renew this authority at the AGM on 23 May 2024.
During the period ending 31 December 2022, the Company
began purchasing shares through an Employee Benefit
Trust called The Bakkavor Group plc Employee Benefit
Trust (“the Trust”). These shares are held to satisfy share
awards under the Group’s share scheme plans. Own shares
purchased are recorded at cost and deducted from equity.
The number of Ordinary shares of £0.02 each held by the
Trust at 30 December 2023 was 4,567,073 (30 December
2022: 2,940,514) and the aggregate amount of the
consideration paid by the Company was £5.5m and as at the
date of publication of this report is £5.8m. This represents
0.79% of total called up share capital at 30 December 2023
(31 December 2022: 0.51%). Total cash purchases made
through the Trust during the year amounted to £2.4m (2022:
£3.1m). No own shares held by the Company were cancelled
during the periods presented.
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 23 May 2024.
Bakkavor Group plc | Annual Report & Accounts 2023 |
149
DIRECTORS’ REPORT
CONTINUED
SIGNIFICANT AGREEMENTS AND RELATIONSHIPS
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. During the year under review, there
were no contracts of significance impacting on the business
of the Group as a whole involving a Director (except as
explained below).
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.
SHAREHOLDER RELATIONSHIP AGREEMENTS
On 12 January 2024, BP-PE5 L.L.C. (an affiliate of the
Baupost Group, “Baupost”) sold its entire shareholding,
representing 20.1% of the share capital in the Company, to
LongRange Capital Fund I, L.P. and its affiliates (“LongRange
Capital”). Pursuant to this, the Company’s relationship
agreement with Baupost terminated. The Company entered
into a relationship agreement with LongRange Capital on 16
January 2024 (“the relationship agreement”) to regulate the
ongoing relationship between the Company and LongRange
Capital. The key terms of the relationship agreement are
available on the Company’s website at www.bakkavor.com/
en/investors/shareholder-information.
CONTROLLING SHAREHOLDERS
The aggregate shareholding in the Company of Carrion
Enterprises Ltd (the corporate holding structure of Agust
Gudmundsson), Umbriel Ventures Ltd (the corporate
holding structure of Lydur Gudmundsson) and their concert
party group (the “controlling shareholders”) is 50.19%. The
Company is party to a relationship agreement with Carrion
Enterprises Ltd, Umbriel Ventures Ltd, the trustee(s) of The
A.G. Trust (which owns 100% of Carrion Enterprises Ltd)
and the trustee(s) of The L.G. Trust (which owns 100% of
Umbriel Ventures Ltd).
Lixaner Co Ltd (an entity which is a concert party of Carrion
Enterprises Ltd and Umbriel Ventures Ltd 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, other than under their
service contract or letter of appointment.
READ MORE
pg 124.
SUBSTANTIAL SHAREHOLDING
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.
30 December 2023
Date of publication
Name
Nature of
holding
Number of
Ordinary shares
% of voting rights
Number of
Ordinary shares
% of voting rights
Carrion Enterprises Ltd
(corporate holding structure
of Agust Gudmundsson)
Indirect
142,103,505
24.52
142,103,505
24.52
Umbriel Ventures Ltd
(corporate holding structure
of Lydur Gudmundsson)
Indirect
142,303,505
24.56
142,303,505
24.56
BP-PE5 L.L.C. (corporate holding
structure of the Baupost Group)
Indirect
119,136,741
20.56
–
–
LongRange Capital Fund I, L.P.
1
Indirect
–
–
116,468,928
20.10
FIL Limited
2
Indirect
58,134,640
10.03
58,134,640
10.03
Aberforth Partners LLP
Indirect
42,853,002
7.40
42,853,002
7.40
1
Shares purchased on 12 January 2024.
2
FIL Limited is the Ultimate controlling entity for shares held by FIL Investment Advisors (UK) Limited and FIL Pensions Management.
150
| Bakkavor Group plc | Annual Report & Accounts 2023
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
ENGAGEMENT WITH SHAREHOLDERS
In accordance with the Code and the UK Stewardship
Code, the Group Board promotes engagement and
interaction between the Group and its major shareholders.
Opportunities are created for investors and shareholders
to engage directly with the Chairman, Senior Independent
Director, Audit and Risk and Remuneration Committee
Chairs, CEO and CFO. An appropriate range of investor
relation conferences and events were attended in 2023
following the publication of full-year and half-year
financial results.
ANNUAL GENERAL MEETING
Bakkavor’s AGM provides the Group Board with the
opportunity to communicate with private and institutional
investors, with time 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 last AGM were duly passed. As recommended by the
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 23 May 2024 will be in person. Full
details of the 23 May 2024 AGM are set out in the Notice
of AGM, including: general arrangements; the resolutions
to be proposed; shareholders’ rights with respect to
attendance; participation in the meeting; and the process
for submission of proxy votes in advance of the meeting.
The Notice of AGM and additional information for
shareholders can be found on the Company’s website at
bakkavor.com/en/investors.
RESEARCH AND DEVELOPMENT
Developing innovative new products remains core to our
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 desire. 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.
COLLEAGUES WITH DISABILITIES
Applications by candidates with disabilities are given full
and fair consideration with regard to their aptitudes and
abilities. Where existing colleagues develop a disability,
every effort is made to ensure that their employment with
Bakkavor continues, and any reasonable adjustments are
made to accommodate them. All adjustments are
considered on an individual basis, supported by medical
opinion, and include, but are not limited to: physical
changes to the workplace; phased return to work;
providing specific equipment to support their daily work
routine; allocating some duties to a co-worker; and
allowing paid time off work for rehabilitation, assessment
or treatment. 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.
COLLEAGUE ENGAGEMENT
Open and constructive communication allows us to hear
views from all levels of the business, keeping our over
c.18,000 colleagues informed and updated on economic and
financial factors. Regular updates are posted on the intranet
and engagement events are hosted with members of the
Senior Executive Team. Colleagues are provided with
information on matters of concern to them in their work
through regular briefing meetings and internal publications.
Colleagues have regular performance reviews, with their
goals aligned to supporting business performance and
their individual career development. Certain colleagues
are eligible to receive a bonus, which is typically linked to
certain financial and non-financial metrics.
We perform a Group-wide Employee Engagement Survey
annually and our latest survey, completed in September
2023, had a response rate of 88%. The 2023 survey provided
valuable insights that were analysed at local, site, business,
function and Group level and have fed into localised action
plans and informed our colleague priorities.
Additionally, our UK Group Employee Forum (“GEF”) and Site
Employee Forum (“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.
The GEF comprises SEF representatives at Group level.
This year, Sanjeevan Bala, the Company’s designated
workforce engagement Non-executive Director, held a number
of workforce engagement sessions on the involvement of the
SEF in staff pay negotiations, site conditions and extending the
variety of products available for colleagues at our staff shops.
We received updates on Bakkavor’s wellbeing activities, with a
particular focus and commitment on mental health. Sanjeevan
also presented to the GEF to explain Executive Reward at
Bakkavor and enhanced transparency around pay and
benefits. Colleagues were shown a presentation on the
alignment of executive remuneration with the wider Company
Pay Policy and discussed how the culture of Bakkavor is taken
into account when setting pay and benefits. The sessions
captured a desire from colleagues to incorporate ESG metrics
in future Executive Rewards which was fed back to the
Remuneration and ESG Committees and led to the introduction
of UK food waste as an additional measure to the STIP,
alongside employee turnover.
The Directors also engage with our colleagues regarding
their interests and the principal decisions taken by the
Company during the financial year can be found in the
section 172(1) statement.
READ MORE:
Board’s key activities pg 95.
ESG: Trusted Partner pg 38.
Bakkavor Group plc | Annual Report & Accounts 2023 |
151
DIRECTORS’ REPORT
CONTINUED
GREENHOUSE GAS EMISSIONS, ENERGY CONSUMPTION
AND ENERGY EFFICIENCY ACTION
We report our emissions, energy consumption and energy
efficiency action planning in accordance with the Task
Force on Climate-related Disclosures (“TCFD”) within our
Strategic Report section. All data shown is for the calendar
year and at a Group level, unless specified.
READ MORE
pg 50.
STREAMLINED ENERGY AND CARBON (“SECR”)
REPORTING
Bakkavor reports SECR data in the Strategic Report as
permitted under s414(C) of the Companies Act 2006
including (i) emissions (pg 61-63), (ii) energy consumption
(pg 61) and (iii) energy efficiency actions (pg 60).
CHARITABLE DONATIONS
Bakkavor believes in giving back to the communities in
which we operate. Our Charity and Political Donations
Policy sets out ways to channel charitable giving: through
monetary and product donations, supporting our colleagues
in their fundraising efforts and advocating skills and
volunteering events. 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.
As part of our corporate charity partnerships, in 2023,
Bakkavor Group donated £236,000 to charities. This
included c.£80,000 to GroceryAid and c.£50,000 to the
Natasha Allergy Research Foundation.
READ MORE
pg 44.
POLITICAL DONATIONS
Bakkavor does not give financial donations nor support
to political individuals, representatives, parties or causes
in any country in which we operate. 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 2025.
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 the
potential impact of lower sales volumes from reduced
consumer demand in response to increasing retail prices.
Having taken these factors into account under the
scenario, which is considered to be severe but plausible,
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.
READ MORE:
Risk management and risk pg 72.
Note 2 of the Financial Statements.
VIABILITY STATEMENT
In line with Provision 31 of the Code, the Group Board
has 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 2026 and considers that the
Group will be able to continue in operation over the
three-year period to the end of December 2026.
READ MORE
pg 81.
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 their 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 12 January 2024, Baupost, who previously held a
significant shareholding (20.1%) in the Group, sold its
entire stake to LongRange Capital and Bob Berlin was
appointed as the representative director for LongRange
Capital on 16 January 2024.
The Directors’ report was approved by the Group Board
on 4 March 2024.
By order of the Group Board
ANNABEL TAGOE-BANNERMAN
Group General Counsel and
Company Secretary Bakkavor Group plc
4 March 2024
152
| Bakkavor Group plc | Annual Report & Accounts 2023
STRATEGIC REPORT
GOVERNANCE
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 UK-adopted international accounting
standards 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).
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 UK-adopted international
accounting standards 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 Financial
Statements, 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 the Annual Report and Financial Statements,
confirm that, to the best of their knowledge:
•
The Group Financial Statements, which have been
prepared in accordance with UK-adopted international
accounting standards, 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.
•
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.
In the case of each Director in office at the date the
Directors’ report is approved:
•
So far as the Director is aware, there is no relevant audit
information of which the Group’s and Company’s Auditors
are unaware.
•
They have taken all the steps that they ought to have taken
as a Director in order to make themselves aware of any
relevant audit information and to establish that the Group’s
and Company’s Auditors are aware of that information.
MIKE EDWARDS
BEN WALDRON
Chief Executive Officer
Chief Financial Officer
4 March 2024
4 March 2024
Statement of Directors’ responsibilities
in respect of the
Financial Statements
Bakkavor Group plc | Annual Report & Accounts 2023 |
153
Financial
Statements
Independent Auditors’ report
156
Consolidated income statement
166
Consolidated statement
of comprehensive income
167
Consolidated statement
of financial position
168
Consolidated statement
of changes in equity
169
Consolidated statement
of cash flows
170
Notes to the Consolidated
Financial Statements
171
Company statement
of financial position
215
Company statement
of changes in equity
215
Notes to the Company
Financial Statements
216
154
| Bakkavor Group plc | Annual Report & Accounts 2023
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
Bakkavor Group plc | Annual Report & Accounts 2023 |
155
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 30 December
2023 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 UK-adopted international
accounting standards as applied in accordance with the
provisions 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, including 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 2023 (the “Annual Report”),
which comprise: the consolidated statement of financial
position and the Company statement of financial position as
at 30 December 2023; the consolidated income statement
and 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.
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 Audit and Risk
Committee report, 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 six components and
specified procedures over a further five components.
•
Central audit procedures performed by the Group audit
team which included the audit of goodwill, the audit of
current and deferred income taxes, the audit of share-
based payment schemes, the audit of the UK defined
benefit pension scheme and the audit of the consolidation.
•
Audit coverage from full scope procedures and specified
procedures is 69% of Group revenue.
•
Full scope audit procedures performed over the
Company financial information.
Key audit matters
•
Recoverability of goodwill in relation to the US Group
cash-generating units (“CGU”) (Group).
•
Recoverability of shares in Group undertakings and
loans to Group undertakings (Company).
Materiality
•
Overall Group materiality: £6,746,400 (2022: £6,800,000)
based on 1% of total revenues capped at 10% of profit
before tax on underlying activities.
•
Overall Company materiality: £4,049,720 (2022:
£4,000,000) based on 1% of total assets.
•
Performance materiality: £5,060,025 (2022: £5,100,000)
(Group) and £3,037,290 (2022: £3,000,000) (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.
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.
156
| Bakkavor Group plc | Annual Report & Accounts 2023
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
This is not a complete list of all risks identified by our audit.
Completeness and accuracy of customer deduction accruals (Group) and Presentation and disclosure of exceptional items
(Group), which were key audit matters last year, are no longer included because of the reduction in magnitude of the
customer deduction accruals and the immaterial value of exceptional items in the year. The recoverability of goodwill key
audit matter has also been amended to include the US CGU only as the UK CGU is not subject to the same level of
uncertainty with inflation as in the prior year. Otherwise, the key audit matters below are consistent with last year.
Key audit matter
How our audit addressed the key audit matter
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 Notes to the Consolidated Financial
Statements.
At the planning stage of the audit, we assessed the design and implementation
of controls over the impairment review process. We concluded that controls
and review procedures surrounding the impairment process and related
calculations are designed and implemented effectively.
Goodwill must be tested for impairment on at least
an annual basis. The determination of recoverable
amount, being the higher of value-in-use (“VIU”) and
fair value less costs of disposal (“FVLCD”), 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, we performed the following procedures.
On 30 December 2023, the Group held goodwill of
£48.7m (2022: £51.3m) in relation to the US CGU.
We focused on the goodwill allocated to the US CGU
as this was determined to be a significant risk in the
current year.
• We obtained the impairment models prepared by management and tested the
technical and arithmetic accuracy to ensure that they had been prepared in line
with the guidance provided in IAS 36. We noted no errors in the models provided
and concluded the methodology applied was appropriate.
Management judgement and estimation is required
to establish the recoverable amount using VIU
models. This includes judgement in the selection of
assumptions used to forecast future cash flows such
as earnings before interest, tax, depreciation and
amortisation (“EBITDA”) growth, climate change
impacts and capital expenditure, and in the selection
of appropriate discount rates and long-term growth
rates (“LTGRs”).
• We reviewed the climate related assumptions within the models. Management
have continued to use the cost estimate utilised in the previous year’s model
provided by management experts, KPMG. These costs are in respect of
management’s decarbonisation strategy and are consistent with management’s
disclosed commitment to reach Net Zero emissions by 2040. We have performed
the following:
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.
a. Considered whether management’s decision to continue to use the prior
year estimate is appropriate;
Refer to the Audit and Risk Committee report for
discussion of this key audit matter.
b. Compared management’s carbon pricing costs to an independent external
source, the International Energy Agency; and
c. Performed sensitivity analysis on the impact of climate costs on the model.
Based on the above mentioned procedures performed, we noted no material
discrepancies.
• We used internal valuations experts to determine whether management’s
discount rate for the CGU was within an acceptable range and concluded that it
was appropriate. Management’s discount rate, which is based on a consistent
methodology, fell within the lower end of our internal valuations ranges provided.
In the prior year, management’s value fell mid-range for the UK and at the
higher end for the US. We have considered whether this indicates any bias in
management’s estimate and conclude that given it is based on a consistent
methodology it remains an appropriate assumption.
•
We used internal valuation experts to determine if the LTGR used in the
impairment model was consistent with external sources of evidence. We noted
an immaterial difference due to the utilisation of distinct sets of source data and
thus concluded that it remained an appropriate assumption.
Bakkavor Group plc | Annual Report & Accounts 2023 |
157
INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF BAKKAVOR GROUP PLC
CONTINUED
Key audit matter
How our audit addressed the key audit matter
•
We identified key cash flow forecast assumptions to which the US model was
sensitive and focused our efforts on these assumptions. We challenged the
basis of the short-term forecasts used in the model, focussing on revenue
growth, EBITDA margin assumptions, and capital expenditure. Procedures
performed included, but were not limited to:
a. Agreeing forecasts to Board approved budgets and three year plan;
b. Reviewing management’s historical accuracy of forecasting;
c. Obtaining a revenue bridge from FY23 to FY24 forecast and agreeing bridge
items to supporting evidence and assessing longer term (FY25) revenue
growth with reference to historical growth and customer commercial
strategies;
d. Obtaining an EBITDA bridge from FY23 actuals through to FY25 forecasts,
and identifying key assumptions for margin growth including volume and
factory performance, as well as forecast inflation, price recovery and
overheads;
e. Obtaining detailed factory performance plans, holding discussions with
site General Managers and Finance teams and reviewing the FY23 run
rate in the second half of the year and FY24 actual performance to date;
f. Reviewing capital expenditure forecasts to Board approved plans and
considering historic expenditure rates; and
g. Reviewing actual performance of the US CGU in 2023 and 2024 to date.
• We reperformed management’s sensitivity analysis by reducing operational
cash flows to simulate downside scenarios and failure to achieve forecast
growth, and separately sensitised the discount rate and LTGR to understand
the impact that possible changes could have. We confirmed these are
mathematically accurate. We challenged management on the disclosures in
order to appropriately reflect the risk surrounding estimation and concluded
that the current disclosures are acceptable.
•
We performed independent sensitivities on the US CGU in the form of stress
tests to assess the deviation from budget that the CGU could withstand before an
impairment would be necessary. These were focused on adjusting those
assumptions which involve greater estimation such as EBITDA growth and
margin improvement. We also compared the downsides in management’s going
concern model for consistency.
•
We concluded that no impairment charge is required based on the testing and
reasonable downside scenarios modelled. We concur with the disclosures
included in the Group Financial Statements.
Recoverability of shares in Group
undertakings and loans to Group
undertakings (company)
Refer to the accounting policies in Note 2, Note 4
and Note 8 of the Company Financial Statements.
Bakkavor Group plc holds a direct investment of
£309.5m (2022: £309.5m) in Bakkavor Holdings
Limited, and through this entity an indirect
investment in the Group.
•
At the planning stage of the audit, we assessed the design and implementation of
controls over the impairment review process for both shares in Group
undertakings and loans to Group undertakings. We concluded that controls and
review procedures surrounding the impairment process and related calculations
are designed and implemented effectively.
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
of £95.5m (2022: £95.6m). Material impairment
to these balances could result in implications for
future dividends.
To address the risk identified:
• We obtained a schedule of shares in Group undertakings and ensured this
reconciled to the Company Financial Statements.
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| Bakkavor Group plc | Annual Report & Accounts 2023
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
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, with respect to
the US and UK, 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 that the Directors were required to perform a full impairment test
of the shares in the Group undertakings’ carrying value.
• We have performed a reconciliation of the loans to Group undertakings amount
and ensured this agrees with the counterparties.
• 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 the terms for the loans to Group
undertakings 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.
We also assessed the adequacy of the disclosure provided in Note 2, Note 4
and Note 8 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 are 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 component. Two reporting components were determined to be financially significant due to their relative contribution
to revenue or absolute profit before tax on underlying activities. 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 four 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 audit procedures were performed. These included:
•
Property, plant and equipment, cash and cash equivalents, inventories, borrowings, and revenue within the US sub-consolidation;
•
Inventories (specifically existence testing) within the Inbound Logistics component;
•
Provisions within one property component;
•
Cash and cash equivalents and payroll accrual balances within the Chinese sub-consolidation; and
•
Cash and cash equivalents, derivative financial instruments, borrowings and related interest expenses within the
finance component.
Specific audit procedures were performed to ensure that we had sufficient audit coverage over the relevant Financial
Statement line items.
The consolidation, Financial Statement disclosures and a number of centralised areas were audited by the Group audit
team at the head office. These included the audit of the recoverability of goodwill, investments, the audit of current and
deferred income taxes, the audit of share-based payment schemes and the audit of the defined benefit pension scheme.
Bakkavor Group plc | Annual Report & Accounts 2023 |
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We also performed 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.
The Company was also subject to a full scope audit by the Group audit team.
This audit work resulted in coverage of 69% of Group revenues.
THE IMPACT OF CLIMATE RISK ON OUR AUDIT
As part of our audit we made enquiries of management to understand the process management adopted to assess the
extent of the potential impact of climate risk on the Group Financial Statements and support the disclosures made within
the Strategic Report.
We challenged the completeness of management’s climate risk assessment by:
•
Reading external reporting made by management to the Carbon Disclosure Project;
•
Reviewing internal climate plans and board minutes; and
•
Reading the Company’s website for details of climate related commitments and impacts.
Management have made a commitment to reach Net Zero emissions across Group operations by 2040. Management are
in the process of developing a detailed pathway to deliver this commitment and have modelled their current best view of
the impact. This will be refined in subsequent periods as the pathway becomes more defined.
The key area of the Group Financial Statements where management evaluated that climate risk has a potentially
significant impact is in determining the value-in-use of its CGU for the assessment of the recoverability of goodwill in
relation to the UK and US, where decarbonisation costs relating to climate credits are a key assumption.
Our audit response in respect of the US CGU is included in the key audit matter above. We also considered the consistency
of the disclosures in relation to climate change (including the disclosures in the Task Force on Climate-related Financial
Disclosures (“TCFD”) section) within the Annual Report with the Group Financial Statements and our knowledge obtained
from our audit. This included obtaining management’s expert reporting used in the TCFD scenario analysis and considering if
the assumptions are consistent with those used in the goodwill recoverability assessment and challenging the completeness
of the disclosures given in the narrative reporting. We have no matters to report as a result of these procedures.
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.
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
£6,746,400 (2022: £6,800,000).
£4,049,720 (2022: £4,000,000).
How we determined it
1% of total revenues capped at 10% of profit before tax on
underlying activities.
1% of total assets.
Rationale for
benchmark applied
Based on the benchmarks used in the Annual Report, several KPIs used
by management to inform its key stakeholders as well as the targets
used for Executive remuneration. Taking these into account we have
considered both revenue and profit before tax on underlying activities
when determining materiality for this period.
We believe that total assets are
an appropriate benchmark for
a holding company.
INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF BAKKAVOR GROUP PLC
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STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
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 £0.3m and £6.5m.
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% (2022: 75%) of overall
materiality, amounting to £5,060,025 (2022: £5,100,000) for the Group Financial Statements and £3,037,290 (2022:
£3,000,000) 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 £337,335 (Group audit) (2022: £340,000) and £202,486 (Company audit) (2022: £200,000) 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:
•
0btaining management’s paper that supports the Board’s assessment and conclusions with respect to the disclosures
provided around going concern and viability;
•
discussing 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;
•
reviewing monthly trading results to January 2024 and February 2024 weekly actuals, and comparing to management’s
original budget and revised forecasts, and considering the impact of these actual results on the future forecast period; and
•
reviewing management’s severe but plausible downside sensitivity scenario. We assessed the availability of liquid
resources under the base case and downside scenarios modelled by management, and the associated covenant tests
applied. We reviewed management’s identified mitigating actions, albeit we note that no significant mitigations are
required for management’s base case.
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.
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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. 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 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 30 December 2023 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.
INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF BAKKAVOR GROUP PLC
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STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
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 and Company 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.
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163
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.
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 pensions 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 the Listing Rules, tax legislation and the 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 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 or EBITDA, 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.
INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF BAKKAVOR GROUP PLC
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STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
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 five years, covering the years ended 28 December 2019 to 30 December 2023.
Other matter
As required by the Financial Conduct Authority Disclosure Guidance and Transparency Rule 4.1.14R, these Financial
Statements form part of the ESEF-prepared annual financial report filed on the National Storage Mechanism of the
Financial Conduct Authority in accordance with the ESEF Regulatory Technical Standard (‘ESEF RTS’). This Auditors’
report provides no assurance over whether the annual financial report has been prepared using the single electronic
format specified in the ESEF RTS.
Sandeep Dhillon (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
Watford
4 March 2024
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165
CONSOLIDATED INCOME STATEMENT
52 WEEKS ENDED 30 DECEMBER 2023
£m
Note
52 weeks ended 30 December 2023
53 weeks ended 31 December 2022
Underlying
activities
Exceptional
items
1
Total
Underlying
activities
Exceptional
items
1
Total
Continuing operations
Revenue
4,5
2,203.8
–
2,139.2
–
Cost of sales
(1,614.4)
–
(1,614.4 )
(1,576.5)
–
(1,576.5 )
Gross profit
589.4
–
562.7
–
Distribution costs
(85.1)
–
(85.1 )
(89.4)
–
(89.4 )
Other administrative costs
(409.9)
1.3
(408.6 )
(385.7)
(50.1)
(435.8 )
(Loss)/profit on disposal of property, plant and
equipment
(0.1)
1.5
0.1
–
Share of profit of associates after tax
–
–
0.2
–
Operating profit
94.3
2.8
87.9
(50.1)
Finance costs
9
(27.4)
–
(27.4 )
(21.0)
–
(21.0 )
Finance income
9
0.6
–
0.2
–
Other gains
10
–
–
1.1
–
Profit before tax
6
67.5
2.8
68.2
(50.1)
Tax charge
11
(16.4)
–
(16.4 )
(14.7)
9.1
(5.6 )
Profit for the period
51.1
2.8
53.5
(41.0)
Earnings per share
Basic
12
Diluted
12
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, significant in nature and are important to users in understanding
the business, including restructuring costs and impairment of assets. In addition, the Group uses further Alternative Performance Measures which can be found in Note 36.
The Notes to the Consolidated Financial Statements form an integral part of the Consolidated Financial Statements.
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STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT
OF COMPREHENSIVE INCOME
52 WEEKS ENDED 30 DECEMBER 2023
£m
Note
52 weeks ended
30 December
2023
53 weeks ended
31 December
2022
Profit for the period
Other comprehensive income/(expense)
Items that will not be reclassified subsequently to profit or loss:
Actuarial loss on defined benefit pension schemes
32
(2.9 )
(26.3 )
Tax relating to components of other comprehensive income
11
(2.2 )
(19.7 )
Items that may be reclassified subsequently to profit or loss:
Exchange differences on translation of foreign operations
(11.7 )
(Loss)/gain on cash flow hedges
(4.4 )
Hedging gains reclassified to profit or loss
(6.8 )
(1.4 )
Tax relating to components of other comprehensive income
11
(3.1 )
(20.1 )
Total other comprehensive (expense)/income
(22.3 )
Total comprehensive income
The Notes to the Consolidated Financial Statements form an integral part of the Consolidated Financial Statements.
Bakkavor Group plc | Annual Report & Accounts 2023 |
167
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 30 DECEMBER 2023
168
| Bakkavor Group plc | Annual Report & Accounts 2023
30 December
31 December
£m
Note
2023
2022
Non-current assets
Goodwill
13
Other intangible assets
14
Property, plant and equipment
15
Interests in associates and other investments
17
Deferred tax asset
23
Retirement benefit asset
32
Derivative financial instruments
22
Current assets
Inventories
18
Trade and other receivables
19
Cash and cash equivalents
20
Derivative financial instruments
22
Total assets
Current liabilities
Trade and other payables
25
(447.6 )
(430.0 )
Current tax liabilities
(3.4 )
(1.1 )
Borrowings
21
(25.4 )
(13.1 )
Lease liabilities
24
(11.6 )
(11.3 )
Provisions
26
(10.4 )
(22.0 )
Derivative financial instruments
22
(0.5 )
(0.3 )
(498.9 )
(477.8 )
Non-current liabilities
Borrowings
21
(240.0 )
(309.2 )
Lease liabilities
24
(78.9 )
(85.9 )
Provisions
26
(15.7 )
(15.0 )
Derivative financial instruments
22
(0.8 )
Deferred tax liabilities
23
(38.4 )
(35.7 )
(373.8 )
(445.8 )
Total liabilities
(872.7 )
(923.6 )
Net assets
Equity
Called up share capital
28
Own shares held
28
(4.4 )
(3.1 )
Merger reserve
28
(130.9 )
(130.9 )
Hedging reserve
28
Translation reserve
28
Retained earnings
Total equity
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 4 March 2024. They were signed
on behalf of the Board of Directors by:
Mike Edwards
Ben Waldron
Chief Executive Officer
Chief Financial Officer and Asia Chief Executive Officer
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT
OF CHANGES IN EQUITY
52 WEEKS ENDED 30 DECEMBER 2023
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169
Called up
Own shares
Merger
Hedging
Translation
Retained
Total
£m
Note
share capital
held
reserve
reserve
reserve
earnings
equity
Balance at 26 December 2021
(130.9 )
Profit for the period
Other comprehensive income/(expense) for the period
(19.7 )
Total comprehensive income/(expense) for the period
(7.2 )
Reclassification to inventory
(1.0 )
(1.0 )
Purchase of own shares
28
(3.1 )
(3.1 )
Dividends
28
(38.8 )
(38.8 )
Credit for share-based payments
31
Cash-settlement of share-based payments
31
(0.6 )
(0.6 )
Deferred tax
11
(0.2 )
(0.2 )
Balance at 31 December 2022
(3.1 )
(130.9 )
Profit for the period
Other comprehensive expense for the period
(8.4 )
(11.7 )
(2.2 )
(22.3 )
Total comprehensive (expense)/income for the period
(8.4 )
(11.7 )
Purchase of own shares
28
(2.4 )
(2.4 )
Dividends
28
(40.8 )
(40.8 )
Credit for share-based payments
31
Proceeds from exercise of share options
31
Equity-settlement of share-based payments
28
(1.1 )
Deferred tax
11
(0.8 )
(0.8 )
Balance at 30 December 2023
(4.4 )
(130.9 )
The Notes to the Consolidated Financial Statements form an integral part of the Consolidated Financial Statements.
CONSOLIDATED STATEMENT OF CASH FLOWS
52 WEEKS ENDED 30 DECEMBER 2023
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52 weeks ended
53 weeks ended
30 December
31 December
£m
Note
2023
2022
Net cash generated from operating activities
29
Investing activities:
Interest received
Dividends received from associates
17
Purchases of property, plant and equipment
(40.4 )
(61.1 )
Proceeds on disposal of property, plant and equipment
Purchase of intangibles
(3.5 )
(2.9 )
Disposal of associate
17
Net cash used in investing activities
(36.9 )
(63.7 )
Financing activities:
Dividends paid
28
(40.8 )
(38.8 )
Own shares purchased
28
(2.4 )
(3.1 )
Proceeds from exercise of share options
Increase in borrowings
Repayment of borrowings
(69.1 )
(9.2 )
Principal elements of lease payments
24
(12.3 )
(14.0 )
Net cash used in financing activities
(113.3 )
(55.4 )
Net (decrease)/increase in cash and cash equivalents
(2.5 )
Cash and cash equivalents at beginning of period
Effect of foreign exchange rate changes
(1.1 )
Cash and cash equivalents at end of period
The Notes to the Consolidated Financial Statements form an integral part of the Consolidated Financial Statements.
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
52 WEEKS ENDED 30 DECEMBER 2023
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(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 (the “Group”) comprise the manufacture of fresh prepared
The Consolidated Financial Statements of the Bakkavor Group plc group have been prepared in accordance with UK-
adopted International Accounting Standards in conformity with the requirements of the Companies Act 2006 and the
disclosure guidance and transparency rules sourcebook of the United Kingdom’s Financial Conduct Authority.
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. Where the fiscal year 2023 is quoted in
these Financial Statements this relates to the 52-week period ended 30 December 2023 . The fiscal year 2022 relates to
the 53-week period ended 31 December 2022.
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
Amendments to IAS 12 ‘Income Taxes’ – Deferred tax related to assets and liabilities arising from a single transaction
On 7 May 2021, the IASB issued amendments to IAS 12 ‘Income Taxes’ relating to deferred tax on assets and liabilities
arising from a single transaction. The amendments require companies to recognise deferred tax on transactions that on
initial recognition give rise to equal amounts of taxable and deductible temporary differences. This amendment has been
adopted by the Group from 1 January 2023 and there are no such temporary differences to be recognised.
Amendments to IAS 12 ‘Income Taxes’ – Pillar Two Income Taxes
The Organisation for Economic Cooperation & Development (“OECD”) has published proposals for a global corporate
minimum tax rate of 15% (“Pillar Two”). On 20 June 2023, legislation in respect of Pillar Two was substantively enacted
in the UK, Finance (No.2) Act 2023, for financial years beginning on or after 31 December 2023. Taxation balances are
adjusted for a change in tax law if the change has been substantively enacted by the balance sheet date. However, the
IASB issued narrow-scope amendments to IAS 12 ‘Income Taxes’ Pillar Two which provide a temporary exemption, which
can be applied immediately, from the requirement to recognise and disclose deferred taxes arising from enacted or
substantively enacted tax law that implements Pillar Two model rules. These amendments were approved for adoption
by the UK Endorsement Board and adopted on 19 July 2023. The Group has applied this exception.
The following new standards, interpretations and amendments effective in the current financial year have not had a
material impact on the consolidated Group financial statements:
•
Annual Improvements to IFRS Standards 2018-2020 Cycle.
•
Narrow scope amendments to IFRS 3, IAS 8, IAS 16 and IAS 37.
•
Insurance contracts IFRS 17.
At the date of authorisation of these Financial Statements, the following Standards and Interpretations relevant to the
Group have not been applied in these Financial Statements as they were in issue but not yet effective:
•
Accounting policies, Changes in Accounting Estimates and Errors: Definition of Accounting Estimates Amendments
to IAS 1 ‘Presentation of Financial Statements’ on classification of liabilities.
•
Amendments to IAS 1 ‘Presentation of Financial Statements’ on non-current liabilities with covenants.
•
Amendments to IFRS 16 ‘Leases’ Lease Liability in a Sale and Leaseback.
The Directors anticipate that the adoption of these Standards and Interpretations will have no material impact on the
Financial Statements of the Group.
All principal accounting policies adopted have been applied consistently and are set out below.
2. Significant accounting policies
continued
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
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The Directors have reviewed the historical trading performance of the Group and the forecasts through to March 2025.
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 the potential impact of lower sales volumes from reduced consumer demand in
response to increasing retail prices.
Having taken these factors into account under the scenario, which is considered to be severe but plausible, 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 Group has adequate resources to meet its liabilities as they fall due for the
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.
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
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.
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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,
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. The CGUs identified by the Group are the three operating regions: the UK, US and China.
This is the lowest level at which goodwill is monitored. 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. Please refer to Note 13 for details of the goodwill impairment assessment.
On disposal of a subsidiary or associate, the attributable amount of goodwill is included in the determination of the profit
or loss on disposal.
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 and less any dividends or distributions received from the associate.
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
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. 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. 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
2. Significant accounting policies
continued
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
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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’.
Volume-based rebates, which are calculated on the Group’s estimate of rebates, are 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 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.
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.
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 within interest paid, in line with the policy for other types
of interest; and
•
Short-term lease payments, payments for leases of low-value assets and variable lease payments not included in the
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
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.
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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
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
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
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
2. Significant accounting policies
continued
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
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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.
During 2022, the Company began purchasing its own Ordinary shares from the market through an Employee Benefit Trust
called the Bakkavor Group plc Employee Benefit Trust. These shares are held to satisfy share awards under the Group’s
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.
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
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.
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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
Assets purchased through a lease agreement are recognised in property, plant and equipment and 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
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
Intangible assets 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 ten years,
and is charged to Other administrative costs in the income statement.
During 2022, the Group revised its accounting policy in relation to upfront configuration and customisation costs incurred
in implementing Software-as-a-Service (“SaaS”) arrangements in response to the IFRIC agenda decision clarifying its
interpretation of how current accounting standards apply to these types of arrangements. The impact of this revision was
not material.
SaaS arrangements are service contracts providing the Group with the right to access the cloud provider’s application
software over the contract period.
Costs incurred to configure or customise, and the ongoing fees to obtain access to the cloud provider’s application
software, are recognised as operating expenses when the services are received, unless the configuration and
customisation activities significantly modify or customise the cloud software, in which case the costs are expensed over
the SaaS contract term.
When they meet the definition of recognition criteria for an intangible asset, costs incurred relating to the development of
software code that enhances or modifies existing on-premise systems are recognised as intangible assets.
The amortisation charge for software, source code, licences and development is recognised as an expense over the term
of the software contract up to a maximum of ten years, and is charged to Other administrative costs in the consolidated
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
2. Significant accounting policies
continued
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
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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
Classification
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
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 30 December 2023 or 31 December 2022 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.
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
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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.
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
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.
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. 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.
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.
2. Significant accounting policies
continued
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
180
| Bakkavor Group plc | Annual Report & Accounts 2023
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
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 contracts 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
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
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 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.
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
Bakkavor Group plc | Annual Report & Accounts 2023 |
181
KEY SOURCES OF ESTIMATION UNCERTAINTY
Pension obligations
The Group maintains a defined benefit pension plan for which it has recorded a pension asset. The obligations included within
the overall pension asset are 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 the US CGU is determined based on the higher of fair value less costs to sell and value-in-use
calculations. The carrying amount of the US CGU is £48.7m (2022: £51.3m); the assumptions used to calculate the
recoverable amount are considered to be a key source of estimation uncertainty. The key assumptions that can impact the
value-in-use calculation are changes to the growth rates applied to derive a three-year forecast, or a movement in the
long-term growth rate and 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 tests of the CGUs
The chief operating decision-maker (“CODM”) has been defined as the Senior Executive Team 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
manufactures fresh prepared foods and produce in each region.
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 Senior Executive Team; 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 Senior Executive Team.
The following table provides an analysis of the Group’s segmental information for the period to 30 December 2023:
£m |
Note |
UK |
US |
China |
Un-allocated |
Total |
Revenue |
1,852.7 |
229.4 |
121.7 |
– |
2,203.8 |
|
Adjusted EBITDA |
36 |
149.2 |
15.0 |
3.9 |
– |
168.1 |
Depreciation |
(51.4) |
(10.6) |
(6.7) |
– |
(68.7) |
|
Amortisation |
(2.0) |
(1.0) |
– |
– |
(3.0) |
|
Share scheme charges |
(2.0) |
– |
– |
– |
(2.0) |
|
Profit/(loss) on disposal of property, plant and equipment |
0.1 |
– |
(0.2) |
– |
(0.1) |
|
Adjusted operating profit/(loss) |
36 |
93.9 |
3.4 |
(3.0) |
– |
94.3 |
Exceptional items |
7 |
2.8 |
(2.9) |
2.9 |
– |
2.8 |
Operating profit/(loss) |
96.7 |
0.5 |
(0.1) |
– |
97.1 |
|
Finance costs |
(27.4) |
|||||
Finance income |
0.6 |
|||||
Other gains and (losses) |
– |
|||||
Profit before tax |
70.3 |
|||||
Tax |
(16.4) |
|||||
Profit for the period |
53.9 |
|||||
Other segment information |
||||||
Capital additions |
31.3 |
14.2 |
1.7 |
– |
47.2 |
|
Interest in associates |
– |
– |
– |
– |
– |
|
Total assets |
1,190.7 |
185.0 |
65.9 |
38.7 |
1,480.3 |
|
Non-current assets |
995.6 |
159.2 |
42.9 |
0.9 |
1,198.6 |
4. Segmental information
continued
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
182
| Bakkavor Group plc | Annual Report & Accounts 2023
The following table provides an analysis of the Group’s segmental information for the period to 31 December 2022:
£m |
Note |
UK |
US |
China |
Un-allocated |
Total |
Revenue |
1,783.1 |
255.3 |
100.8 |
– |
2,139.2 |
|
Adjusted EBITDA |
36 |
147.7 |
12.4 |
(0.1) |
– |
160.0 |
Depreciation |
(52.8) |
(8.7) |
(6.8) |
– |
(68.3) |
|
Amortisation |
(0.3) |
(0.4) |
– |
– |
(0.7) |
|
Share scheme charges |
(1.9) |
– |
– |
– |
(1.9) |
|
Profit on disposal of property, plant and equipment |
– |
– |
0.1 |
– |
0.1 |
|
Share of results of associates |
– |
– |
0.2 |
– |
0.2 |
|
Adjusted operating profit/(loss) |
36 |
92.7 |
3.3 |
(6.6) |
– |
89.4 |
Exceptional items |
7 |
(36.6) |
(3.8) |
(9.7) |
– |
(50.1) |
Configuration and customisation costs for SaaS projects |
(1.5) |
– |
– |
– |
(1.5) |
|
Operating profit/(loss) |
54.6 |
(0.5) |
(16.3) |
– |
37.8 |
|
Finance costs |
(21.0) |
|||||
Finance income |
0.2 |
|||||
Other gains and (losses), net |
1.1 |
|||||
Profit before tax |
18.1 |
|||||
Tax |
(5.6) |
|||||
Profit for the period |
12.5 |
|||||
Other segment information |
||||||
Capital additions |
46.0 |
39.0 |
1.9 |
– |
86.9 |
|
Interest in associates |
– |
– |
3.6 |
– |
3.6 |
|
Total assets |
1,215.1 |
200.2 |
73.3 |
52.8 |
1,541.4 |
|
Non-current assets |
1,018.1 |
167.8 |
55.5 |
9.9 |
1,251.3 |
All of the Group’s revenue is derived from the sale of goods in 2022 and 2023. There were no inter-segment revenues.
The un-allocated assets of £38.7m (2022: £52.8m) 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.
MAJOR CUSTOMERS
In 2023, the Group’s four largest customers accounted for 73.9% (2022: 73.2%) of the Group’s total revenue from
continuing operations. These customers accounted for 88.0% (2022: 87.9%) 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:
2023 |
2022 |
|
Customer A |
32.4% |
32.6% |
Customer B |
21.5% |
20.5% |
Customer C |
13.1% |
12.2% |
Customer D |
6.9% |
7.9% |
The Group derives all revenue from the sale of goods in the following geographic locations:
£m |
2023 |
2022 |
Continuing operations |
||
UK |
1,852.7 |
1,783.1 |
US |
229.4 |
255.3 |
China |
121.7 |
100.8 |
2,203.8 |
2,139.2 |
Upon completion of delivery (the performance obligation), the terms of the order allow 30 to 75 days (2022: 30 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 69.4% (2022: 67.4%) of the Group’s total
sales. These arrangements allow the Group to choose to factor the receivable for approved invoices and receive payment
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
Bakkavor Group plc | Annual Report & Accounts 2023 |
183
Profit before tax for the period has been arrived at after charging/(crediting):
£m |
Note |
2023 |
2022 |
Depreciation of property, plant and equipment: |
|||
– Owned |
56.4 |
55.7 |
|
– Leased |
12.3 |
12.6 |
|
Research and development costs |
9.1 |
9.0 |
|
Cost of inventory recognised as an expense |
1,029.1 |
1,022.3 |
|
Amortisation of intangible assets |
3.0 |
0.7 |
|
Exceptional items |
7 |
(2.8) |
50.1 |
Loss/(profit) on disposal of property, plant and equipment |
0.1 |
(0.1) |
|
Share scheme charges |
31 |
2.0 |
1.9 |
Foreign exchange gains |
10 |
– |
(1.2) |
Staff costs |
8 |
591.9 |
594.7 |
£m |
2023 |
2022 |
The audit of the Company’s Consolidated Financial Statements |
0.4 |
0.4 |
The audit of the Company’s subsidiaries pursuant to legislation |
0.8 |
0.7 |
Total audit fees |
1.2 |
1.1 |
Non-audit fees of £45,000 (2022: £41,000) were paid to the Group’s Auditors for permitted audit-related assurance and
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, which is reported as our ‘Adjusted’ measures, 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 and impairment of assets:
£m |
2023 |
2022 |
Corporate restructuring costs |
– |
(5.3) |
UK site closures release/(accrual) of restructuring provision: |
||
– Closure costs |
2.2 |
(11.8) |
– Impairment charge |
0.6 |
(19.5) |
Investment in associate impairment |
– |
(9.7) |
US asset impairment charge |
(3.5) |
– |
US customer contractual dispute impairment |
0.6 |
(3.8) |
Profit on disposal of property, plant and equipment |
1.5 |
– |
Profit on disposal of associates |
1.4 |
– |
Total exceptional items |
2.8 |
(50.1) |
Tax on exceptional items |
– |
9.1 |
Total exceptional items after tax |
2.8 |
(41.0) |
2023
The Group has recognised £2.8m of exceptional income for the year. This includes the following:
•
£1.5m profit on disposal of property, plant and equipment following the sale and leaseback of one of the properties the
Group operates from within the China segment.
•
£1.4m profit on disposal of associates, following the sale of its 45% share in two associate companies, La Rose Noire
Limited and Patisserie et Chocolat Limited, on 8 May 2023.
•
£3.5m impairment charge for fixed assets that will now no longer have any value to the US business.
•
The release of 2022 provision of £0.6m of impairment charges on assets for the UK business and £0.6m for the US
business that are no longer required.
•
£2.2m for the release of UK 2022 closure cost provisions following the sites closing earlier in 2023 than originally planned.
7. Exceptional items
continued
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
184
| Bakkavor Group plc | Annual Report & Accounts 2023
2022
For the period ended 31 December 2022, the Group incurred an exceptional charge of £50.1m comprising the following:
•
£17.1m relates to restructuring costs for the closure of two of our UK sites by the end of Q1 2023, and the costs of a
corporate restructuring, which includes redundancy payments, onerous and other closure costs.
•
An impairment charge of £19.3m in respect of the relevant fixed assets at the two sites due to close and £0.2m for the
impairment of intangible assets for one of the businesses and these charges had no cash impact.
•
The value of the Group’s investment in associated undertakings based in Hong Kong was written down by £9.7m due
to the ongoing impact of Covid on the trading performance of that business.
•
An ongoing contractual dispute with a US customer has resulted in a £3.8m impairment of inventory and receivables
related to this customer.
The average monthly number of employees (including Executive Directors) during the period was:
2023 |
2022 |
|
Number |
Number |
|
Production |
14,906 |
15,283 |
Management and administration |
2,345 |
2,378 |
Sales and distribution |
885 |
919 |
18,136 |
18,580 |
Their aggregate remuneration comprised:
£m |
Note |
2023 |
2022 |
Wages and salaries |
515.7 |
518.0 |
|
Social security and other costs |
63.1 |
63.5 |
|
Other pension costs |
32 |
13.1 |
13.2 |
591.9 |
594.7 |
£m |
Note |
2023 |
2022 |
Interest on borrowings 1 |
(16.4) |
(13.5) |
|
Interest on non-recourse receivables financing |
(7.1) |
(3.6) |
|
Interest on lease liabilities |
(3.0) |
(3.1) |
|
Unwinding of discount on provisions |
26 |
(0.9) |
(0.8) |
Total finance costs |
(27.4) |
(21.0) |
1
£m |
2023 |
2022 |
Interest received on bank deposits |
0.6 |
0.2 |
There were no borrowing costs included in the cost of qualifying assets during 2022 or 2023. 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.
Amounts included in the cost of qualifying assets have been capitalised under IAS 23 and are therefore subject to deferred
10. Other gains and (losses)
£m |
2023 |
2022 |
Foreign exchange gains |
– |
1.2 |
Change in the fair value of derivative financial instruments |
– |
(0.1) |
– |
1.1 |
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
Bakkavor Group plc | Annual Report & Accounts 2023 |
185
£m |
Note |
2023 |
2022 |
Current tax: |
|||
Current period |
14.3 |
9.7 |
|
Prior period adjustment |
(1.2) |
1.7 |
|
Total current tax charge (pre-exceptional items) |
13.1 |
11.4 |
|
Deferred tax: |
|||
Deferred tax relating to the origination and reversal of temporary differences in the period |
0.9 |
3.7 |
|
Deferred tax relating to changes in tax rates |
0.2 |
1.6 |
|
Prior period adjustment |
2.2 |
(2.0) |
|
Total deferred tax charge (pre-exceptional items) |
23 |
3.3 |
3.3 |
Tax on exceptional items: |
|||
Current tax |
0.6 |
(3.4) |
|
Deferred tax |
(0.6) |
(5.7) |
|
Total tax credit on exceptional items |
– |
(9.1) |
|
Total tax charge for the period |
16.4 |
5.6 |
The Group tax charge for the period was £16.4m (2022: £5.6m) which represents an effective tax rate of 23.4% (2022:
30.9%) on profit before tax of £70.3m (2022: £18.1m). 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. As a consequence of the UK corporation tax
rate increasing to 25% from 1 April 2023, the 23.5% rate for financial year 2023 comprises three months at 19% and nine
months at 25%. The effective tax rate is 0.1% lower (2022: 11.9% higher) than the blended UK statutory tax rate as detailed
in the table below.
Excluding exceptional items and other adjusting items the adjusted tax rate on underlying activities was 24.4% (2022: 21.5%)
(see Note 36).
The charge for the period can be reconciled to the profit per the consolidated income statement as follows:
2023 |
2023 |
2022 |
2022 |
|
£m |
% |
£m |
% |
|
Profit before tax: |
70.3 |
100.0 |
18.1 |
100.0 |
Tax charge at the UK corporation tax rate of 23.5% (2022: 19%) |
16.5 |
23.5 |
3.4 |
19.0 |
Net non-deductible expenses/(non-taxable income) |
(1.5) |
(2.1) |
(1.2) |
(6.9) |
Non-deductible impairment of investment |
– |
– |
1.8 |
10.2 |
Prior period adjustment |
1.0 |
1.4 |
(0.3) |
(1.7) |
Tax effect of losses carried forward not recognised |
1.0 |
1.4 |
1.0 |
5.5 |
Unprovided deferred tax assets now recognised |
(0.4) |
(0.5) |
– |
– |
Overseas taxes at different rates |
0.3 |
0.4 |
0.4 |
2.2 |
Deferred tax rate differential |
0.2 |
0.3 |
0.5 |
2.6 |
Exceptional non-taxable income |
(0.7) |
(1.0) |
– |
– |
Tax charge and effective tax rate for the period |
16.4 |
23.4 |
5.6 |
30.9 |
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:
£m |
2023 |
2022 |
Tax relating to components of other comprehensive income/(expense): |
||
Deferred tax: |
||
Remeasurements on defined benefit pension scheme actuarial (loss)/gain |
(0.7) |
(5.0) |
Deferred tax rate change on defined benefit pension scheme actuarial (loss)/gain |
– |
(1.6) |
Cash flow hedges and cost of hedging |
(2.8) |
3.1 |
Deferred tax on share schemes |
0.8 |
0.2 |
(2.7) |
(3.3) |
|
Tax relating to components of other comprehensive income/(expense): |
(3.5) |
(3.5) |
Tax relating to share-based payments recognised directly in equity: |
0.8 |
0.2 |
(2.7) |
(3.3) |
11. Tax
continued
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
186
| Bakkavor Group plc | Annual Report & Accounts 2023
HMRC had previously raised an enquiry into the structure used to fund our overseas investment in the US business. Although
a number of earlier years have been agreed, there is uncertainty for some years 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.
In addition, at the end of 2023, the Group holds a tax provision of £1.0m (2022: £1.0m) because it is considered likely that
additional liabilities will become due to the tax authorities.
OTHER FACTORS AFFECTING FUTURE TAX CHARGES
The Organisation for Economic Cooperation & Development (“OECD”) has published proposals for a global corporate
minimum tax rate of 15%. The UK implementation of these rules (“Pillar Two”) will be effective for accounting periods
commencing on or after 31 December 2023 and will therefore impact the Group in the accounting period ending December
2024. During 2023 the Group undertook an initial impact assessment of the UK rules based on FY 2022 Country by Country
Reporting (CbCR) data. This assessment concluded that, provided that the CbCR report is prepared in accordance with
OECD guidelines, all jurisdictions in which the Group operates are expected to meet at least one of the transitional CbCR
safe harbour tests (which potentially apply up to the year ended December 2026) which results in no top-up taxes being
due. The rules are complex and the Group will continue to evaluate the impact of Pillar Two on the Group tax charge,
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, excluding own shares held.
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 £m |
2023 |
2022 |
Profit for the period |
53.9 |
12.5 |
Number of shares ‘000 |
2023 |
2022 |
Weighted average number of Ordinary shares |
576,129 |
577,576 |
Effect of potentially dilutive Ordinary shares |
12,576 |
9,767 |
Weighted average number of Ordinary shares including dilution |
588,705 |
587,343 |
2023 |
2022 |
|
Basic earnings per share |
9.4p |
2.2p |
Diluted earnings per share |
9.2p |
2.1p |
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
Bakkavor Group plc | Annual Report & Accounts 2023 |
187
£m |
|
Cost |
|
At 26 December 2021 |
703.1 |
Exchange differences |
5.5 |
At 31 December 2022 |
708.6 |
Exchange differences |
(4.0) |
At 30 December 2023 |
704.6 |
Accumulated impairment losses |
|
At 26 December 2021 |
(53.0) |
Exchange differences |
(0.5) |
At 31 December 2022 |
(53.5) |
Exchange differences |
1.4 |
At 30 December 2023 |
(52.1) |
Carrying amount |
|
At 30 December 2023 |
652.5 |
At 31 December 2022 |
655.1 |
Goodwill acquired in a business combination is allocated, at acquisition, to the CGU or groups of CGUs that are expected to
benefit from that business combination. The carrying value of goodwill has been allocated to CGU groupings as follows:
30 December |
31 December |
|
£m |
2023 |
2022 |
UK |
603.8 |
603.8 |
US |
48.7 |
51.3 |
China |
– |
– |
652.5 |
655.1 |
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 (2022: £nil).
The Group is committed to achieving Net Zero carbon emissions across our Group operations by 2040. For the current
year impairment review, management has also included an estimate of 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 30 December 2023 and 31 December
2022 were as follows:
•
Budget 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 three years (2022: three years), as determined by the business units, which take account of the
current risks faced by the business including cost inflation and associated price recovery leading to a potential impact on
consumer demand. EBITDA margin increases are a key assumption for the US CGU and assume a return to FY21 margin
levels within the three-year forecast period. The Group defines operating cash flows for the value in use calculations as
adjusted EBITDA, after deducting maintenance capital expenditure for the relevant CGUs.
•
Long-term growth rates: For periods beyond the three-year budget, the cash flows are then extrapolated using a
perpetuity growth rate of 2.0% (2022: 2.0%) for the UK and 2.1% for the US (2022: 2.0%). The terminal value includes
an estimate of carbon costs from 2032.
•
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 9.3% (2022: 9.3%) for the UK and 9.2% for the US (2022: 9.8%).
The headroom for CGU based on the impairment review as at 30 December 2023 is as follows:
£m | UK | US |
Headroom of impairment test based on management assumptions | 385.6 | 149.8 |
13. Goodwill
continued
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
188
| Bakkavor Group plc | Annual Report & Accounts 2023
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, is set
out below, none of which indicate an impairment is likely:
•
The US operating cash flows are primarily driven by adjusted EBITDA. This could be negatively impacted by loss of
revenue or from lower operating margins. If operating cash flows were 39% lower and no mitigating actions were taken,
this would result in no headroom.
•
The perpetuity growth rate included in the US CGU future cash flows is 2.1%. If the perpetuity growth rate was to
decrease by 720 bps to (5.1)%, this would result in no headroom.
•
The pre-tax discount rate for the US CGU is 9.2%, an increase to the pre-tax discount rate by 800 bps to 17.2% would
Customer | ||||
£m | Note | relationships | Software | Total |
Cost | ||||
At 26 December 2021 | 88.9 | – | 88.9 | |
Reclassified from property, plant and equipment | 15 | – | 13.5 | 13.5 |
Additions | – | 2.9 | 2.9 | |
Exchange differences | 0.7 | – | 0.7 | |
At 31 December 2022 | 89.6 | 16.4 | 106.0 | |
Reclassified from property, plant and equipment | 15 | – | 2.2 | 2.2 |
Additions | – | 3.4 | 3.4 | |
Exchange differences | (0.4) | – | (0.4) | |
At 30 December 2023 | 89.2 | 22.0 | 111.2 | |
Accumulated amortisation and impairment | ||||
At 26 December 2021 | (87.2) | – | (87.2) | |
Reclassified from property, plant and equipment | 15 | – | (8.7) | (8.7) |
Charge for the period | (0.6) | (0.1) | (0.7) | |
Impairment charge | 7 | (0.2) | – | (0.2) |
Exchange differences | (0.4) | – | (0.4) | |
At 31 December 2022 | (88.4) | (8.8) | (97.2) | |
Charge for the period | (0.9) | (2.1) | (3.0) | |
Reclassified from property, plant and equipment | 15 | – | (0.8) | (0.8) |
Exchange differences | 0.3 | – | 0.3 | |
At 30 December 2023 | (89.0) | (11.7) | (100.7) | |
Carrying amount | ||||
At 30 December 2023 | 0.2 | 10.3 | 10.5 | |
At 31 December 2022 | 1.2 | 7.6 | 8.8 |
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
Bakkavor Group plc | Annual Report & Accounts 2023 |
189
Land and | Plant and | Fixtures and | |||
£m | Note | buildings | machinery | equipment | Total |
Cost | |||||
At 26 December 2021 | 356.6 | 663.0 | 123.3 | 1,142.9 | |
Additions | 30.8 | 37.8 | 18.3 | 86.9 | |
Disposals | (3.2) | (3.3) | (16.1) | (22.6) | |
Reclassified to intangible assets | 14 | – | (0.8) | (12.7) | (13.5) |
Exchange differences | 6.6 | 6.5 | 0.9 | 14.0 | |
At 31 December 2022 | 390.8 | 703.2 | 113.7 | 1,207.7 | |
Additions | 11.0 | 31.1 | 5.1 | 47.2 | |
Disposals | (5.5) | (17.3) | (1.8) | (24.6) | |
Reclassified to intangible assets | 14 | – | (1.9) | (0.3) | (2.2) |
Exchange differences | (7.3) | (6.2) | (1.1) | (14.6) | |
At 30 December 2023 | 389.0 | 708.9 | 115.6 | 1,213.5 | |
Accumulated depreciation and impairment | |||||
At 26 December 2021 | (130.4) | (393.7) | (73.6) | (597.7) | |
Charge for the period | (21.0) | (34.6) | (12.7) | (68.3) | |
Impairment | (4.6) | (11.6) | (3.1) | (19.3) | |
Disposals | 3.2 | 3.3 | 16.1 | 22.6 | |
Reclassified to intangible assets | 14 | – | 0.4 | 8.3 | 8.7 |
Exchange differences | (2.6) | (2.4) | (0.6) | (5.6) | |
At 31 December 2022 | (155.4) | (438.6) | (65.6) | (659.6) | |
Charge for the period | (20.9) | (35.5) | (12.3) | (68.7) | |
Impairment | – | (2.9) | – | (2.9) | |
Disposals | 0.6 | 16.7 | 1.8 | 19.1 | |
Reclassified to intangible assets | 14 | – | 0.6 | 0.2 | 0.8 |
Exchange differences | 2.5 | 2.5 | 0.7 | 5.7 | |
At 30 December 2023 | (173.2) | (457.2) | (75.2) | (705.6) | |
Carrying amount | |||||
At 30 December 2023 | 215.8 | 251.7 | 40.4 | 507.9 | |
At 31 December 2022 | 235.4 | 264.6 | 48.1 | 548.1 |
Included within land and buildings is freehold land held at historic cost of £11.5m (2022: £11.5m). Freehold land is not depreciated.
The carrying value of the Group’s plant and machinery includes an amount of £0.1m (2022: £0.5m) 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 £79.5m (2022:
£86.7m) 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 £35.9m (2022: £28.1m) in respect of assets held as
security under Asset Finance Facilities. Further details of these facilities are disclosed in Note 21. At 30 December 2023, the Group
had entered into contractual commitments for the acquisition of property, plant and equipment amounting to £4.2m (2022: £8.6m).
Assets are not depreciated until they are brought into use. At 30 December 2023 a total of £31.7m (2022: £41.8m) of other
assets were in progress and had not been brought into use.
During 2022, the Group completed a review of software assets included within Property, plant and equipment and
determined that assets with a net book value of £4.8m should be reclassified to Other intangible assets. In 2023 we have
reclassified further assets to intangible assets from fixtures and equipment with a total net book value of £1.4m.
During 2022, the Group impaired £4.6m of land and buildings including right-of-use assets of £0.3m, £11.6m of plant and
machinery including right-of-use assets of £0.3m and £3.1m of fixtures and equipment. These impairment charges arose
from sites that closed by the end of March 2023. 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 the year of £2.9m wholly relate to plant and equipment, and relate to a reversal of a £0.6m
impairment recognised in the UK sector in 2022 and an impairment charge of £3.5m in the US sector relating to 2023.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
190
| Bakkavor Group plc | Annual Report & Accounts 2023
The Group consists of a Parent Company, Bakkavor Group plc, incorporated in the UK, and a number of subsidiaries held
directly and indirectly by Bakkavor Group plc. Note 5 to the Company’s separate Financial Statements provides details of
30 December |
31 December |
|
£m |
2023 |
2022 |
Name of associate |
||
La Rose Noire Limited |
– |
2.8 |
Patisserie et Chocolat Limited |
– |
0.8 |
Total associates |
– |
3.6 |
Other investments |
0.1 |
0.1 |
Total associates and other investments |
0.1 |
3.7 |
Details of the associated undertakings of the Group at 30 December 2023 and 31 December 2022 were as follows:
| Proportion of Ordinary shares |
|||||
Place of registration |
30 December |
31 December |
Method of |
||
and operation |
Principal activity |
2023 |
2022 |
accounting |
|
Name of associate |
|||||
La Rose Noire Limited |
Hong Kong |
Producer of bakery and pastry products |
– |
45% |
Equity |
Patisserie et Chocolat Limited |
Hong Kong |
Producer of bakery and pastry products |
– |
45% |
Equity |
On 8 May 2023, the Group disposed of its 45% interest in the two associate companies, La Rose Noire Limited and
Patisserie et Chocolat Limited. The net consideration received was £4.6m and the carrying amount of the investments
before the sale was £3.2m, resulting in a £1.4m profit on disposal. The associates paid a dividend of £1.6m to the Group
30 December |
31 December |
|
£m |
2023 |
2022 |
Raw materials and packaging |
60.1 |
73.0 |
Work-in-progress |
2.6 |
3.0 |
Finished goods |
8.6 |
10.2 |
71.3 |
86.2 |
30 December |
31 December |
|
£m |
2023 |
2022 |
Amounts receivable from trade customers |
142.6 |
130.4 |
Expected credit loss |
(1.3) |
(3.6) |
Net amounts receivable from trade customers |
141.3 |
126.8 |
Other receivables |
17.0 |
23.2 |
Prepayments |
13.4 |
11.0 |
171.7 |
161.0 |
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 30 December 2023, £145.2m was drawn
under factoring facilities (2022: £138.0m) representing cash collected before it was contractually due from the customer.
As at 30 December 2023, the Group’s Amounts receivable from trade customers includes £72.8m (2022: £62.0m), which
could be factored under the non-recourse trade receivable factoring arrangement.
The average credit period taken on sales of goods is 23 days (2022: 22 days). An expected credit loss allowance has been
made for estimated irrecoverable amounts from the sale of goods of £1.3m (2022: £3.6m). 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.
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
Bakkavor Group plc | Annual Report & Accounts 2023 |
191
The Directors consider that the carrying amount of trade and other receivables from customers approximates to their fair
value due to their short-term nature.
The 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:
30 December |
31 December |
|
£m |
2023 |
2022 |
Not past due |
133.8 |
120.4 |
Past due by 1 – 30 days |
6.2 |
5.2 |
Past due by 31 – 60 days |
0.9 |
0.9 |
Past due by 61 – 90 days |
0.4 |
0.3 |
Past due by more than 90 days |
– |
– |
141.3 |
126.8 |
There was no impact from trade receivables renegotiated in 2023 that would have otherwise been past due or impaired
(2022: no impact).
The four major customers of the Group, representing 73.9% (2022: 73.2%) 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 or 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 other than that provided against 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:
£m |
2023 |
2022 |
Balance at beginning of the period |
(3.6) |
(2.8) |
Allowances recognised against receivables |
(1.7) |
(2.1) |
Amounts written off as uncollectible during the period |
2.8 |
0.2 |
Amounts recovered during the period |
0.7 |
0.6 |
Allowance reversed |
0.5 |
0.5 |
Balance at end of the period |
(1.3) |
(3.6) |
30 December |
31 December |
|
£m |
2023 |
2022 |
Cash and cash equivalents |
36.6 |
40.2 |
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 interest rates and currency profile of the Group’s borrowings at 30 December 2023 were as follows:
Amount drawn |
|||||
Facility amount |
down at year end |
||||
Currency |
£m |
£m |
Interest rate |
Maturity date |
|
Term Loan |
GBP |
225.0 |
225.0 |
SONIA 2 plus a margin of 2.10% |
Mar 2026 1 |
Revolving Credit Facility (“RCF”) |
GBP |
230.0 |
– |
SONIA 2 plus a margin of 2.10% |
Mar 2026 1 |
Asset Finance Facility |
GBP |
16.9 |
16.9 |
Fixed interest rate |
Aug 2027 |
Asset Finance Facility |
GBP |
17.9 |
17.9 |
Fixed interest rate |
Aug 2028 |
Asset Finance Facility |
USD |
2.8 |
2.8 |
SOFR 3 plus 2.12% |
Feb 2024 |
Total |
492.6 |
262.6 4 |
1
£12.4m of the term loan and £12.6m 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.
3
SOFR stands for Secured Overnight Financing Rate.
4
£262.6m represents the committed facilities of the Group. The Group’s consolidated statement of financial position discloses £265.4m which includes local overdraft facilities,
unamortised fees and interest accrued.
21. Borrowings
continued
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
192
| Bakkavor Group plc | Annual Report & Accounts 2023
On 18 March 2020, the Group completed a refinancing of its core debt facilities through a new term loan and Revolving
Credit Facility totalling £455.0m. 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.
£430m of these facilities were extended in March 2021 and further extended in March 2022 to mature in March 2026.
The Group’s total banking facilities amount to £455.0 m (2022: £455.0m) comprising:
1. £225.0m in term loans (2022: £225.0m term loan), with £12.4m maturing in March 2024 and £212.6m in March 2026; and
2. £230.0m Revolving Credit Facilities (“RCF”) (2022: £230.0m RCF), which includes an overdraft and money market facility of
£20.0m (2022: £20.0m) and further ancillary facilities of £13.3m (2022: £13.3m). For the RCF, £12.6m matures in March 2024
and £217.4m in March 2026. The bank facilities are unsecured and 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.
The Asset Finance Facility is made up of three separate facilities which are secured against specific items of plant and
machinery as follows:
a. £25.0m facility, which could be drawn against up to August 2020, of which the Group initially drew down £24.9m with
£16.9m outstanding at the end of 2023. 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 30 December 2023 was 2.41% (2022: 2.41%). The interest rate is fixed at the prevailing rate on
commencement of the loan tranche.
b. £13.1m drawn down during 2021 and £9.9m during 2023 under separate asset financing facilities with £17.9m outstanding
at the end of 2023. No further draw down can be made against these facilities. The facilities have been drawn in tranches,
with each tranche being repaid on a monthly basis over a period of five or seven years, and the weighted average interest
rate for the facility at 30 December 2023 is 4.61% (2022: 3.20%). The interest rate is fixed at the prevailing rate on
commencement of the loan tranche.
c. Bakkavor Foods USA Inc entered into an asset financing facility during 2022 of up to $5.0m (£4.1m) of funding, based on
approved funding requests. As at 30 December 2023, £2.8m funding had been approved and drawn (2022: £1.7m) and the
interest rate for this was a variable rate of SOFR plus 2.12% (2022: 2.12%).
In September 2021 the Group transitioned from LIBOR to SONIA which impacted £455.0m of the total debt facilities.
In addition, the Group has access to £10.7m (2022: £8.9m) of local overdraft facilities in the US and China which are
uncommitted and unsecured. One of the Group’s UK subsidiary companies, Bakkavor Finance (2) Limited, has provided
Corporate Guarantees totalling $8m for the US local overdraft facility and RMB 40m for the China local overdraft facility.
30 December |
31 December |
|
£m |
2023 |
2022 |
Bank overdrafts |
3.4 |
8.2 |
Bank loans |
262.0 |
314.1 |
265.4 |
322.3 |
|
Borrowings repayable as follows: |
||
On demand or within one year |
25.4 |
13.1 |
In the second year |
5.7 |
16.1 |
In the third to fifth years inclusive |
234.3 |
292.4 |
Over five years |
– |
0.7 |
265.4 |
322.3 |
|
Analysed as: |
||
Amount due for settlement within 12 months (shown within current liabilities) |
25.4 |
13.1 |
Amount due for settlement after 12 months |
240.0 |
309.2 |
265.4 |
322.3 |
|
2023 |
2022 |
|
% |
% |
|
The weighted average interest rates paid excluding interest swap benefits were as follows: |
||
Bank loans and overdrafts |
6.38 |
3.50 |
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:
30 December |
31 December |
|
£m |
2023 |
2022 |
Fair value of the Group’s borrowings |
266.1 |
324.5 |
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
Bakkavor Group plc | Annual Report & Accounts 2023 |
193
Net debt is 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:
30 December |
31 December |
|
£m |
2023 |
2022 |
Analysis of net debt |
||
Cash and cash equivalents |
36.6 |
40.2 |
Borrowings |
(25.5) |
(14.1) |
Interest accrual |
(0.5) |
(0.4) |
Unamortised fees |
0.6 |
1.4 |
Lease liabilities |
(11.6) |
(11.3) |
Debt due within one year |
(37.0) |
(24.4) |
Borrowings |
(240.5) |
(310.4) |
Unamortised fees |
0.5 |
1.2 |
Lease liabilities |
(78.9) |
(85.9) |
Debt due after one year |
(318.9) |
(395.1) |
Group net debt |
(319.3) |
(379.3) |
30 December |
31 December |
|
£m |
2023 |
2022 |
Foreign currency contracts – designated in a hedging relationship |
0.1 |
1.5 |
Interest rate contracts – designated in a hedging relationship |
0.8 |
8.4 |
Included in non-current assets |
0.9 |
9.9 |
Foreign currency contracts – designated in a hedging relationship |
0.3 |
2.6 |
Interest rate contracts – designated in a hedging relationship |
1.8 |
0.1 |
Included in current assets |
2.1 |
2.7 |
Foreign currency contracts – designated in a hedging relationship |
(0.5) |
(0.2) |
Interest rate contracts – designated in a hedging relationship |
– |
(0.1) |
Included in current liabilities |
(0.5) |
(0.3) |
Foreign currency contracts – designated in a hedging relationship |
(0.1) |
– |
Interest rate contracts – designated in a hedging relationship |
(0.7) |
– |
Included in non-current liabilities |
(0.8) |
– |
Total |
1.7 |
12.3 |
Derivative financial instruments are subject to enforceable master netting agreements. However, they 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.
The following are the major deferred tax liabilities and assets recognised by the Group and movements thereon during the
current and prior reporting period.
Retirement |
|||||||
Accelerated |
benefit |
Overseas tax |
|||||
tax |
Fair value |
obligations and |
losses and |
US |
|||
£m |
depreciation 1 |
gains |
Provisions |
share schemes |
accrued interest |
goodwill |
Total |
At 26 December 2021 |
(39.8) |
0.2 |
0.7 |
(8.6) |
26.1 |
(9.3) |
(30.7) |
(Charge)/credit to income |
(6.3) |
(0.2) |
0.2 |
0.5 |
3.4 |
(0.9) |
(3.3) |
Credit to income on exceptional items |
4.7 |
– |
– |
– |
1.0 |
– |
5.7 |
Exchange differences |
(0.9) |
– |
– |
– |
3.1 |
– |
2.2 |
(Charge)/credit to equity and other comprehensive income |
– |
(3.1) |
– |
6.4 |
– |
– |
3.3 |
At 31 December 2022 |
(42.3) |
(3.1) |
0.9 |
(1.7) |
33.6 |
(10.2) |
(22.8) |
(Charge)/credit to income |
(4.8) |
– |
– |
(0.3) |
2.4 |
(0.6) |
(3.3) |
Credit to income on exceptional items |
0.6 |
– |
– |
– |
– |
– |
0.6 |
Exchange differences |
0.2 |
– |
– |
– |
(1.8) |
0.6 |
(1.0) |
Credit/(charge) to equity and other comprehensive income |
– |
2.8 |
– |
– |
– |
– |
2.8 |
At 30 December 2023 |
(46.3) |
(0.3) |
0.9 |
(2.0) |
34.2 |
(10.2) |
(23.7) |
1
IAS 23 Capitalised interest and Intangibles deferred tax balances are shown within the Accelerated tax depreciation values above.
23. Deferred tax
continued
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
194
| Bakkavor Group plc | Annual Report & Accounts 2023
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:
30 December |
31 December |
|
£m |
2023 |
2022 |
Deferred tax assets |
14.7 |
12.9 |
Deferred tax liabilities |
(38.4) |
(35.7) |
(23.7) |
(22.8) |
Within the deferred tax asset above, £3.7m is expected to reverse no more than 12 months after the reporting period and
£11.0m more than 12 months after the reporting period.
Included in the above are deferred tax assets of £33.6m (2022: £32.8m) in connection with US tax losses and accrued
interest amounts which will be deductible in future accounting periods. These deferred tax assets are offset by liabilities
for which there is a legally enforceable right to do so. The US tax losses and accrued interest amounts can be carried
forward indefinitely and used against future US taxable profits.
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.
In evaluating whether it is probable that sufficient taxable profits will be earned in future accounting periods, all available
evidence has been considered by management including forecasts and business plans. These forecasts are consistent
with those prepared and used internally for business planning and impairment testing purposes. Following this
evaluation, management determined there would be sufficient taxable profits generated to continue to recognise these
deferred tax assets in full.
Deferred tax assets in respect of some capital losses as well as trading losses 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:
30 December |
31 December |
|
£m |
2023 |
2022 |
Capital losses |
5.0 |
5.0 |
Trading losses |
19.3 |
21.2 |
24.3 |
26.2 |
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 £17.8m (2022: £20.3m) 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.
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.
30 December |
31 December |
|
£m |
2023 |
2022 |
Net book value of leased property, plant and equipment excluding right-of-use assets |
0.2 |
0.5 |
Net book value of right-of-use assets |
79.5 |
86.7 |
79.7 |
87.2 |
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
Bakkavor Group plc | Annual Report & Accounts 2023 |
195
Land and |
Plant and |
||
£m |
buildings |
machinery |
Total |
At 26 December 2021 |
70.3 |
2.9 |
73.2 |
Additions |
25.2 |
0.3 |
25.5 |
Depreciation charge |
(10.9) |
(1.2) |
(12.1) |
Impairment for the period |
(0.3) |
(0.3) |
(0.6) |
Exchange differences |
0.7 |
– |
0.7 |
At 31 December 2022 |
85.0 |
1.7 |
86.7 |
Additions |
10.6 |
0.4 |
11.0 |
Disposals |
(4.8) |
– |
(4.8) |
Depreciation charge |
(11.2) |
(0.9) |
(12.1) |
Exchange differences |
(1.3) |
– |
(1.3) |
At 30 December 2023 |
78.3 |
1.2 |
79.5 |
LEASE LIABILITIES
| Present value of |
||
minimum lease payments |
||
30 December |
31 December |
|
£m |
2023 |
2022 |
Amounts payable under leases: |
||
Within one year |
11.6 |
11.3 |
In the second to fifth years inclusive |
32.1 |
36.6 |
Over five years |
46.8 |
49.3 |
Present value of lease obligations |
90.5 |
97.2 |
Analysed as: |
||
Amount due for settlement within 12 months |
11.6 |
11.3 |
Amount due for settlement after 12 months |
78.9 |
85.9 |
90.5 |
97.2 |
|
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.
30 December |
31 December |
|
£m |
2023 |
2022 |
Lease liabilities relating to leases previously recognised under IAS 17 |
0.2 |
0.6 |
Lease liabilities relating to leases recognised under IFRS 16 |
90.3 |
96.6 |
90.5 |
97.2 |
The weighted average lease term outstanding is 13.0 years (2022: 14.5 years). For 2023, the weighted average incremental
borrowing rate was 3.2% (2022: 3.2%). 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
£m |
2023 |
2022 |
Interest on lease liabilities |
3.0 |
3.1 |
Expenses relating to low-value leases |
3.3 |
3.3 |
Expenses relating to short-term leases |
1.6 |
1.4 |
7.9 |
7.8 |
AMOUNTS RECOGNISED IN THE STATEMENT OF CASH FLOWS
£m |
2023 |
2022 |
Cash outflow for lease principal payments |
12.3 |
14.0 |
Cash outflow for lease interest payments |
3.0 |
3.1 |
Total cash outflow for leases |
15.3 |
17.1 |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
196
| Bakkavor Group plc | Annual Report & Accounts 2023
30 December |
31 December |
|
£m |
2023 |
2022 |
Trade payables |
262.4 |
287.5 |
Other taxation |
2.2 |
2.1 |
Other payables |
26.7 |
26.8 |
Accruals and deferred income |
156.3 |
113.6 |
Trade and other payables due within one year |
447.6 |
430.0 |
Trade payables and accruals principally comprise amounts outstanding for trade purchases and ongoing costs. The
average credit period taken for trade purchases is 64 days (2022: 63 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 30 December 2023, trade payables amounting to £42.7m (2022:
£45.1m) 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.
Onerous |
Dilapidation |
Legal and other |
Restructuring |
||
£m |
contracts |
provisions |
provisions |
provisions |
Total |
At 26 December 2021 |
1.8 |
16.6 |
3.9 |
0.5 |
22.8 |
Transferred between classifications |
0.5 |
– |
– |
(0.5) |
– |
Utilisation of provision |
(0.3) |
– |
(0.1) |
(1.8) |
(2.2) |
Additional provision in the year |
– |
2.1 |
– |
16.6 |
18.7 |
Release of provision |
(0.5) |
(0.1) |
(2.6) |
– |
(3.2) |
Unwinding of discount |
0.2 |
0.6 |
– |
– |
0.8 |
Exchange differences |
– |
0.1 |
– |
– |
0.1 |
At 31 December 2022 |
1.7 |
19.3 |
1.2 |
14.8 |
37.0 |
Included in current liabilities |
0.4 |
5.6 |
1.2 |
14.8 |
22.0 |
Included in non-current liabilities |
1.3 |
13.7 |
– |
– |
15.0 |
At 1 January 2023 |
1.7 |
19.3 |
1.2 |
14.8 |
37.0 |
Utilisation of provision |
– |
– |
– |
(9.7) |
(9.7) |
Additional provision in the year |
– |
0.4 |
1.0 |
– |
1.4 |
Release of provision |
– |
(0.3) |
(1.0) |
(2.2) |
(3.5) |
Unwinding of discount |
0.2 |
0.7 |
– |
– |
0.9 |
Exchange differences |
– |
– |
– |
– |
– |
At 30 December 2023 |
1.9 |
20.1 |
1.2 |
2.9 |
26.1 |
Included in current liabilities |
0.4 |
5.9 |
1.2 |
2.9 |
10.4 |
Included in non-current liabilities |
1.5 |
14.2 |
– |
– |
15.7 |
Onerous contracts provisions relate to the Group’s leased vacant properties. The onerous contract provision has been
calculated as the discounted total expected costs for occupying the properties (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 16 years. During the prior year, two of the Group’s leased properties
relating to the previously closed non-core UK fast-casual restaurant business were fully surrendered, and therefore no
liability remains for these leases.
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 27 years.
The legal and other provisions, which are expected to be settled within 12 months, 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.
During the prior year, a restructuring provision was recognised for the closure of two of our UK sites and the costs of a corporate
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
Bakkavor Group plc | Annual Report & Accounts 2023 |
197
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, 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
GEARING RATIO
The gearing ratio at the period end was as follows:
30 December |
31 December |
|
£m |
2023 |
2022 |
Debt (excluding IFRS 16 lease liabilities) |
265.6 |
322.9 |
Cash and cash equivalents |
(36.6) |
(40.2) |
Net debt |
229.0 |
282.7 |
Equity |
607.6 |
617.8 |
Net debt to net debt plus equity |
27.4% |
31.4% |
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 £90.3m at 30 December 2023 (£96.6m at 31 December 2022)).
Restated |
||
30 December |
31 December |
|
£m |
2023 |
2022 1 |
Financial assets |
||
Fair value through profit and loss: |
||
Trade receivables |
72.8 |
62.0 |
Derivative financial instruments |
3.0 |
12.6 |
Measured at amortised cost: |
||
Trade receivables |
68.5 |
64.8 |
Other receivables |
5.4 |
9.9 |
Cash and cash equivalents |
36.6 |
40.2 |
186.3 |
189.5 |
1
Restated |
||
30 December |
31 December |
|
£m |
2023 |
2022 1 |
Financial liabilities |
||
Fair value through profit and loss: |
||
Derivative financial instruments |
1.3 |
0.3 |
Other financial liabilities at amortised cost: |
||
Trade payables |
262.4 |
287.5 |
Other payables |
15.0 |
12.6 |
Accruals |
155.3 |
112.3 |
Borrowings |
265.4 |
322.3 |
Lease liabilities |
90.5 |
97.2 |
789.9 |
832.2 |
1
Fair values for the derivative financial instruments 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.
27. Financial instruments
continued
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
198
| Bakkavor Group plc | Annual Report & Accounts 2023
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.
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
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
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 30 December 2023, the Euro weakened against Sterling by 2.0% (2022: 53-week period
strengthened by 4.7%), with the closing rate at €1.1518 compared with €1.1293 at the prior period end. The average rate for
the 52-week period to 30 December 2023 was €1.1503 (2022: 53-week period at €1.1727), a 1.9% strengthening (2022: 0.9%
weakening) of the Euro versus the prior period.
In the same period, the US dollar weakened against Sterling by 5.5% (2022: strengthened by 9.9%), with the closing rate at
$1.2739 compared with $1.2077 at the prior period end. The average rate for the 52-week period to 30 December 2023 was
$1.2441 (2022: $1.2375), a 0.5% weakening (2022: 10.0% strengthening) of the US dollar versus the prior period.
The net foreign exchange impact on profit from transactions was £nil (2022: gain of £1.2m).
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) |
Profit or (loss) |
|||
10% strengthening in currency |
10% weakening in currency |
|||
£m |
2023 |
2022 |
2023 |
2022 |
Euro |
2.6 |
3.1 |
(3.1) |
(3.8) |
USD |
2.9 |
3.9 |
(3.6) |
(4.8) |
HKD |
(0.2) |
(0.3) |
0.2 |
0.4 |
RMB |
(0.8) |
(0.5) |
1.0 |
0.7 |
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
Bakkavor Group plc | Annual Report & Accounts 2023 |
199
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.
The Group has applied hedge accounting to its forward contracts that were put in place on or after 27 December 2020.
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.
There were no Sterling foreign currency contracts outstanding as at 30 December 2023, which were entered into on or
before 26 December 2020, for which hedge accounting was not applied.
The following table details Sterling foreign currency contracts outstanding as at 30 December 2023, which were entered
into on or after 27 December 2020, for which hedge accounting is applied:
Foreign currency (m) |
Average exchange rate |
Contract value (£m) |
Fair value movement (£m) |
|||||
Outstanding contracts |
2023 |
2022 |
2023 |
2022 |
2023 |
2022 |
2023 |
2022 |
Net Euros: |
||||||||
3 months or less |
33.5 |
37.5 |
1.14 |
1.08 |
29.2 |
32.0 |
(0.1) |
1.3 |
3 to 6 months |
37.4 |
38.5 |
1.14 |
1.06 |
32.7 |
33.2 |
(0.1) |
1.1 |
6 to 12 months |
43.3 |
37.8 |
1.14 |
1.05 |
37.9 |
32.8 |
0.1 |
1.1 |
Over 12 months |
5.0 |
19.8 |
1.15 |
1.14 |
4.4 |
17.3 |
– |
0.5 |
Net US dollars: |
||||||||
3 months or less |
6.2 |
4.4 |
1.25 |
1.23 |
5.0 |
3.5 |
(0.1) |
0.1 |
3 to 6 months |
4.3 |
3.3 |
1.27 |
1.21 |
3.4 |
2.8 |
– |
– |
6 to 12 months |
4.4 |
6.0 |
1.26 |
1.21 |
3.5 |
5.0 |
(0.1) |
(0.1) |
Over 12 months |
0.4 |
0.8 |
1.28 |
1.22 |
0.3 |
0.7 |
– |
– |
116.4 |
127.3 |
(0.3) |
4.0 |
|||||
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.
Change in fair value used | ||||||||
Average contracted | Carrying amount of the hedging | for calculating hedge | ||||||
exchange rate | Contract value | instrument assets/(liabilities) | ineffectiveness | |||||
Hedging instruments | 2023 | 2022 | 2023 £m | 2022 £m | 2023 £m | 2022 £m | 2023 £m | 2022 £m |
Forward contracts – EURO | 1.14 | 1.08 | 104.2 | 115.3 | (0.1) | 4.0 | (4.1) | 5.1 |
Forward contracts – USD | 1.26 | 1.21 | 12.2 | 12.0 | (0.1) | – | (0.1) | (0.1) |
Balance in cash flow hedge |
||||||||
Change in value used for |
reserve arising from hedging |
|||||||
Nominal amount of the hedge |
calculating hedge |
Balance in cash flow hedge |
relationships for which hedge |
|||||
item (liabilities) |
ineffectiveness |
reserve for continuing hedges |
accounting is no longer applied |
|||||
2023 Foreign |
2022 Foreign |
|||||||
currency |
currency |
2023 |
2022 |
2023 |
2022 |
2023 |
2022 |
|
Hedging items |
m |
m |
£m |
£m |
£m |
£m |
£m |
£m |
Foreign currency purchases – EURO |
119.2 |
133.6 |
0.1 |
(4.0) |
(0.1) |
4.0 |
– |
– |
Foreign currency purchases – USD |
15.3 |
14.5 |
0.1 |
– |
(0.1) |
– |
– |
– |
The following table details the effectiveness of the hedging relationship and the amounts reclassified from hedging reserve:
Amount of hedge |
Line item in the income |
Due to hedged future cash |
Line item in which |
|||||
Current period hedging |
ineffectiveness |
statement in which hedge |
flows being no longer |
adjustment is |
||||
losses recognised in OCI |
recognised in profit or loss |
ineffectiveness is included |
expected to occur |
included |
||||
2023 |
2022 |
2023 |
2022 |
2023 |
2022 |
|||
Hedged items |
£m |
£m |
£m |
£m |
£m |
£m |
||
Foreign currency purchases |
(4.2) |
5.0 |
– |
– |
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.
27. Financial instruments
continued
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
200
| Bakkavor Group plc | Annual Report & Accounts 2023
INTEREST RATE SENSITIVITY ANALYSIS
Interest rate sensitivity analysis has been performed on borrowings as set out in Note 21, net of existing interest rate
swaps, 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 this is management’s assessment of reasonably possible changes in interest rates.
(Loss)/profit |
(Loss)/profit |
|
£m |
2023 |
2022 |
Effects of 100 basis points increase in interest rate |
(0.8) |
(1.4) |
Effects of 100 basis points decrease in interest rate |
0.8 |
1.4 |
It is assumed that all other variables remain the same when preparing the interest rate sensitivity analysis. In addition,
interest rate sensitivity analysis has been performed on amounts owed under the Group’s trade receivables factoring
arrangement. A 100 basis points increase or decrease has been used as this is management’s assessment of reasonably
possible changes in interest rates.
(Loss)/profit |
(Loss)/profit |
|
£m |
2023 |
2022 |
Effects of 100 basis points increase in interest rate |
(1.4) |
(1.4) |
Effects of 100 basis points decrease in interest rate |
1.4 |
1.4 |
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
£150m 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.
The Group transitioned from LIBOR to SONIA in 2021. All of the interest rate swaps amounting to £150.0m 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.
Carrying amount of the |
Change in fair value used |
|||||||
Average contracted fixed |
hedging instrument |
for calculating hedge |
||||||
interest rate |
Notional principal value |
assets/(liabilities) |
ineffectiveness |
|||||
2023 |
2022 |
2023 |
2022 |
2023 |
2022 |
2023 |
2022 |
|
Hedging instruments |
% |
% |
£m |
£m |
£m |
£m |
£m |
£m |
Interest rate swaps maturing 13 March 2024 |
0.4 |
0.4 |
150.0 |
150.0 |
1.8 |
7.4 |
(5.6) |
4.9 |
Interest rate swaps commencing 13 March 2024 |
3.7 |
2.3 |
130.0 |
30.0 |
0.1 |
1.0 |
(0.9) |
1.0 |
Balance in cash flow hedge |
||||||||
Change in value used for |
Balance in cash flow |
reserve arising from hedging |
||||||
Nominal amount of the |
calculating hedge |
hedge reserve for |
relationships for which hedge |
|||||
hedged item (liabilities) |
ineffectiveness |
continuing hedges |
accounting is no longer applied |
|||||
2023 |
2022 |
2023 |
2022 |
2023 |
2022 |
2023 |
2022 |
|
Hedging items |
£m |
£m |
£m |
£m |
£m |
£m |
£m |
£m |
Variable rate borrowings |
(280.0) |
(180.0) |
(6.5) |
(5.9) |
1.9 |
8.4 |
– |
– |
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
Bakkavor Group plc | Annual Report & Accounts 2023 |
201
The following table details the effectiveness of the hedging relationship and the amounts reclassified from hedging
reserve to income statement:
Amount reclassified to income |
Line item in income |
|||||||
Current period hedging |
Amount of hedge |
Line item in the income |
statement due to hedged future |
statement in which |
||||
gains/ (losses) |
ineffectiveness recognised |
statement in which hedge |
cash flows being no longer |
reclassification |
||||
recognised in OCI |
in profit or loss |
ineffectiveness is included |
expected to occur |
adjustment is included |
||||
2023 |
2022 |
2023 |
2022 |
2023 |
2022 |
|||
Hedged items |
£m |
£m |
£m |
£m |
£m |
£m |
||
Variable rate borrowings |
(6.5) |
5.9 |
– |
– |
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 2023 the net amount received and recognised against expenses in finance costs
was £6.8m (2022: £1.4m). After payment or receipt the hedge is revalued and movements are recognised as a movement
in the hedging reserve.
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% (2022: 73%) 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 that are counterparties in the Group’s committed bank facilities to spread the risk. The Group’s current
bank facilities comprise a £225.0m term loan (2022: £225.0m) and a £230.0m RCF facility (2022: £230.0m), 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:
30 December |
31 December |
|
£m |
2023 |
2022 |
UK |
126.6 |
120.9 |
US |
14.1 |
15.4 |
China |
17.6 |
13.7 |
158.3 |
150.0 |
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 30 December
2023 there were £0.9m (2022: £nil) of trade receivables past due by 91 days. This figure has been included in the expected
credit loss of £1.3m (2022: £3.6m). The Group will generally write-off any trade receivables relating to customers that are
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 3-12 months forward. The Group also manages any local currency exposure in line with agreed
contracts. As at 30 December 2023, the Group had purchase commitments for the next 12 months to guarantee supply
and price of raw materials of £200m (2022: £145.5m).
27. Financial instruments
continued
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
202
| Bakkavor Group plc | Annual Report & Accounts 2023
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 30 December 2023, the Group has undrawn borrowing
facilities, including cash, available totalling £263.0m (2022: £201.4m). Please see Note 21 for further information
regarding the Group’s borrowings. The Group also has access to a trade factoring arrangement which provides additional
MATURITY PROFILE OF FINANCIAL LIABILITIES
The following table illustrates the Group’s undiscounted contractual maturity for its undiscounted financial liabilities when
they fall due.
Restated |
||
30 December |
31 December |
|
£m |
2023 |
2022 2 |
Non-derivatives due within one year: |
||
Trade payables |
262.4 |
287.5 |
Other payables |
15.0 |
12.6 |
Accruals |
155.3 |
112.3 |
Borrowings 1 |
32.2 |
23.2 |
Lease liabilities |
14.2 |
14.2 |
Total non-derivatives due within one year |
479.1 |
449.8 |
Non-derivatives due in the second to fifth years inclusive: |
||
Borrowings 1 |
265.3 |
349.4 |
Lease liabilities |
41.4 |
44.6 |
Total non-derivatives due in the second to fifth years |
306.7 |
394.0 |
Non-derivatives due after five years: |
||
Borrowings 1 |
– |
0.7 |
Lease liabilities |
60.4 |
63.2 |
Total non-derivatives due after five years |
60.4 |
63.9 |
1
Borrowings’ future interest costs have been calculated excluding any benefit from fixed rate interest rate swaps.
2
The other payables in the prior period has been restated to strip out the payroll taxes of £14.2m.
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 instrument liabilities when they fall due.
30 December |
31 December |
|
£m |
2023 |
2022 |
Derivative financial liabilities |
||
Due within one year |
0.5 |
0.3 |
Due in the second to fifth years inclusive |
0.8 |
– |
Total |
1.3 |
0.3 |
ITEMS OF INCOME, EXPENSE, GAINS OR LOSSES
The following table provides an analysis of the Group’s finance costs and income and changes in fair values by category of
financial instrument:
£m |
2023 |
2022 |
Finance costs and income |
||
On financial liabilities held at amortised cost |
(27.4) |
(21.0) |
Finance income |
0.6 |
0.2 |
Changes in fair values recognised in Other gains and (losses) |
||
On financial liabilities held at fair value through profit and loss |
– |
(0.1) |
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
Bakkavor Group plc | Annual Report & Accounts 2023 |
203
30 December |
31 December |
|
£m |
2023 |
2022 |
Issued and fully paid: |
||
579,425,585 (2022: 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
During the prior and current period, the Company purchased shares through an Employee Benefit Trust called the Bakkavor
Group plc Employee Benefit Trust (the “Trust”). Own shares purchased are recorded at cost and deducted from equity.
The own shares held represents the cost of shares in Bakkavor Group plc purchased in the market and held by the Trust
to satisfy share awards under the Group’s share scheme plans (refer to Note 31).
The number of Ordinary shares held by the Trust at 30 December 2023 was 4,567,073 (30 December 2022: 2,940,514).
This represents 0.79% of total called up share capital at 30 December 2023 (31 December 2022: 0.51%).
Total cash purchases made through the EBT during the year amounted to £2.4m (2022: £3.1m).
Number of |
||
£m |
shares |
£000 |
Balance at 1 January 2023 |
2,940,514 |
3,074 |
Acquisition of shares by the Trust |
2,688,310 |
2,447 |
Distribution of shares under share scheme plans |
(1,061,751) |
(1,149) |
Balance at 30 December 2023 |
4,567,073 |
4,372 |
Number of |
|||||
Dividend per |
dividend rights |
||||
Reporting period ended |
share |
Declared |
Date paid |
waived 1 |
Amount paid |
30 December 2023 |
|||||
Interim dividend |
2.91p |
September 2023 |
13 October 2023 |
3,264,816 |
£16,766,278 |
31 December 2022 |
|||||
Final dividend |
4.16p |
May 2023 |
5 June 2023 |
2,886,522 |
£23,984,025 |
Interim dividend |
2.77p |
September 2022 |
14 October 2022 |
2,492,273 |
£15,981,053 |
25 December 2021 |
|||||
Final dividend |
3.96p |
May 2022 |
30 May 2022 |
2,439,135 |
£22,848,663 |
1
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 £185.8m 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).
28. Called up share capital, dividends and reserves
continued
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
204
| Bakkavor Group plc | Annual Report & Accounts 2023
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
£m |
2023 |
2022 |
Operating profit |
97.1 |
37.8 |
Adjustments for: |
||
Share of profit of associates after tax |
– |
(0.2) |
Depreciation of property, plant and equipment |
68.7 |
68.3 |
Amortisation of intangible assets |
3.0 |
0.7 |
Profit on disposal of property, plant and equipment |
(1.4) |
(0.1) |
Profit on disposal of associate |
(1.4) |
– |
Impairment of assets |
2.9 |
29.2 |
Share scheme charges |
2.0 |
1.3 |
Net retirement benefits charge less contributions |
(2.1) |
(2.2) |
Operating cash flows before movements in operating assets and liabilities |
168.8 |
134.8 |
Decrease/(increase) in inventories |
16.3 |
(15.8) |
(Increase) in receivables |
(8.1) |
(17.3) |
Increase in payables |
18.9 |
32.8 |
(Decrease)/increase in exceptional provisions |
(11.9) |
18.4 |
(Decrease) in provisions |
(0.1) |
(1.4) |
Cash generated by operations |
183.9 |
151.5 |
Income taxes paid |
(11.0) |
(5.1) |
Interest paid |
(25.2) |
(19.3) |
Net cash generated from operating activities |
147.7 |
127.1 |
1 January |
Cash |
Lease |
Exchange |
Other non-cash |
30 December |
|
£m |
2023 |
flow |
additions |
movements |
movements 1 |
2023 |
Borrowings |
(322.3) |
58.0 |
– |
0.5 |
(1.6) |
(265.4) |
Lease liabilities |
(97.2) |
12.3 |
(6.2) |
0.6 |
– |
(90.5) |
Total liabilities from financing activities |
(419.5) |
70.3 |
(6.2) |
1.1 |
(1.6) |
(355.9) |
Cash and cash equivalents |
40.2 |
(2.5) |
– |
(1.1) |
– |
36.6 |
Net debt |
(379.3) |
67.8 |
(6.2) |
– |
(1.6) |
(319.3) |
26 December |
Cash |
Lease |
Exchange |
Other non-cash |
31 December |
|
£m |
2021 |
flow |
additions |
movements |
movements 1 |
2022 |
Borrowings |
(320.6) |
(0.5) |
– |
(0.2) |
(1.0) |
(322.3) |
Lease liabilities |
(84.6) |
14.0 |
(25.6) |
(1.0) |
– |
(97.2) |
Total liabilities from financing activities |
(405.2) |
13.5 |
(25.6) |
(1.2) |
(1.0) |
(419.5) |
Cash and cash equivalents |
31.1 |
8.0 |
– |
1.1 |
– |
40.2 |
Net debt |
(374.1) |
21.5 |
(25.6) |
(0.1) |
(1.0) |
(379.3) |
1
Includes accrued interest at 30 December 2023 of £0.5m (2022: £0.4m) and prepaid bank fees of £1.1m (2022: £2.6m). The net reduction in these balances in the period of £1.6m
counterparties. The Group regularly reviews all of these claims to determine any possible financial loss to the Group.
In addition, there are a number of legal claims or potential claims against the Group; please see Note 26 for further
The Group has the following amounts of letters of credit issued:
£m |
2023 |
2022 |
Letters of credit |
4.9 |
4.4 |
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
Bakkavor Group plc | Annual Report & Accounts 2023 |
205
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 |
|||
2023 |
2022 |
2023 |
2022 |
|
Outstanding at the beginning of the period |
18,761,203 |
17,713,853 |
£0.05 |
£0.12 |
Granted during the period |
6,143,820 |
5,723,603 |
– |
– |
Granted in lieu of dividends during the period |
1,192,085 |
23,834 |
– |
– |
Exercised during the period |
(1,003,194) |
(1,628,144) |
£0.18 |
£0.74 |
Forfeited during the period |
(1,436,608) |
– |
– |
– |
Expired and lapsed during the period |
(669,281) |
(3,071,943) |
– |
– |
Outstanding at the end of the period |
22,988,025 |
18,761,203 |
£0.04 |
£0.05 |
Exercisable at the end of the period |
8,648,087 |
2,635,939 |
£0.05 |
£0.21 |
In addition 340,521 were outstanding at the 30 December 2023 (30 December 2022: 292,837) in respect of options granted
to Directors in respect of their Deferred Annual Bonus entitlement.
The average share price on the date options were exercised during the period was £0.90 (2022: £1.12).
The options outstanding at 30 December 2023 had a weighted average exercise price of £0.04 (2022: £0.05), and a weighted
average remaining contractual life of 5.4 years (2022: 5.1 years).
Range of exercise prices for the share options:
| Number of share options |
Weighted average exercise price |
|||
30 December |
31 December |
30 December |
31 December |
|
2023 |
2022 |
2023 |
2022 |
|
£nil |
20,922,569 |
16,461,600 |
– |
– |
£0.01 – £1.00 |
2,065,456 |
2,299,603 |
£0.40 |
£0.44 |
Outstanding at the end of the period |
22,988,025 |
18,761,203 |
£0.04 |
£0.05 |
Exercisable at the end of the period |
8,648,087 |
2,635,939 |
£0.05 |
£0.21 |
2023
5,107,894 options were granted on 12 April 2023, 61,576 were granted on 22 May 2023 and 236,316 were granted on
12 October 2023. These options granted had the following performance conditions for vesting:
•
282,276 vest provided the individual is an employee in April 2026.
•
Provided that the first condition is met, 50% of the remaining options vest provided the Group’s TSR national rank versus a
bespoke peer group of 26 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.
•
Provided that the first condition is met, 25% of the remaining options vest provided the Group’s adjusted EPS for the 2025
financial year is 10.0 pence, with up to a further 50% of the remaining options vesting on a sliding scale if the Group’s
adjusted EPS is between 10.0 pence and 11.5 pence for that year.
479,445 options were granted on 12 April 2023 and 258,589 were granted on 12 October 2023. These options granted had
the following performance conditions for vesting:
•
159,814 and 86,196 vest provided that the individual is an employee in April 2026 and October 2026 respectively.
•
Provided that the first condition is met, 25% of the remaining options vest provided the Bakkavor US adjusted EBIT
margin percentage for the 2025 financial year is 6.0%, with up to a further 100% of the remaining options vesting on
a sliding scale if the Bakkavor US adjusted EBIT margin percentage is between 6.0% and 8.0% for that year.
2022
4,884,708 options were granted on 13 April 2022 and 81,289 were granted on 13 October 2022. These options granted had
the following performance conditions for vesting:
•
128,036 vest provided the individual is an employee in April 2025.
•
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.
31. Share-based payments
continued
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
206
| Bakkavor Group plc | Annual Report & Accounts 2023
•
Provided that the first condition is met, 12.5% of the remaining options vest provided the Group’s adjusted EPS for
the 2024 financial year is 12.0 pence, with up to a further 50% of the remaining options vesting on a sliding scale if
the Group’s adjusted EPS is between 12.0 pence and 13.8 pence for that year.
757,606 options were granted on 13 October 2022. These options granted had the following performance conditions for vesting:
•
252,534 vest provided that the individual is an employee in October 2025.
•
Provided that the first condition is met, 25% of the remaining options vest provided the Bakkavor US adjusted EBIT
margin percentage for the 2024 financial year is 6.0%, with up to a further 100% of the remaining options vesting on
a sliding scale if the Bakkavor US adjusted EBIT margin percentage is between 6.0% and 8.0% for that year.
The aggregate of the estimated fair values of outstanding options is £20.1m (2022: £18.3m). The following table
summarises the options granted by the Company:
Number |
||||||||
of options |
Contractual life |
Expected life |
||||||
originally |
remaining |
Share price at |
Expected |
remaining |
Expected |
Fair value |
||
Date of grant |
granted |
(years) |
date of grant |
volatility |
(years) |
Risk-free rate |
dividend yield |
per option |
12 April 2023 |
1,593,844 |
9.3 |
£1.01 |
45.8% |
2.28 |
3.47% |
0.00% |
£1.01 |
12 April 2023 |
1,593,844 |
9.3 |
£1.01 |
45.8% |
2.28 |
3.47% |
0.00% |
£1.01 |
12 April 2023 |
849,753 |
9.3 |
£1.01 |
45.8% |
2.28 |
3.47% |
0.00% |
£1.01 |
12 April 2023 |
849,753 |
9.3 |
£1.01 |
45.8% |
2.28 |
3.47% |
0.00% |
£1.01 |
12 April 2023 |
319,631 |
9.3 |
£1.01 |
45.8% |
2.28 |
3.47% |
0.00% |
£1.01 |
12 April 2023 |
220,700 |
9.3 |
£1.01 |
47.7% |
2.28 |
3.47% |
0.00% |
£1.01 |
12 April 2023 |
159,814 |
9.3 |
£1.01 |
47.7% |
2.28 |
3.47% |
0.00% |
£1.01 |
22 May 2023 |
61,576 |
9.3 |
£1.01 |
47.7% |
2.28 |
3.47% |
0.00% |
£1.01 |
12 October 2023 |
118,158 |
9.8 |
£0.938 |
43.3% |
2.78 |
4.43% |
0.00% |
£0.938 |
12 October 2023 |
118,158 |
9.8 |
£0.938 |
43.3% |
2.78 |
4.43% |
0.00% |
£0.938 |
12 October 2023 |
172,393 |
9.8 |
£0.938 |
43.3% |
2.78 |
4.43% |
0.00% |
£0.938 |
12 October 2023 |
86,196 |
9.8 |
£0.938 |
43.3% |
2.78 |
4.43% |
0.00% |
£0.938 |
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 2023 is £nil (2022: £nil). The fair value of awards, which have a TSR performance condition, takes
account of the likelihood of meeting these targets.
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.
The Group recognised total expenses of £2.0 million (2022: £1.9m) related to equity-settled share-based payment transactions
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
Bakkavor Group plc | Annual Report & Accounts 2023 |
207
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 (“the 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:
£m |
2023 |
2022 |
UK defined contribution scheme net charge |
12.7 |
12.6 |
UK defined benefit scheme net charge |
0.4 |
0.6 |
Total charge |
13.1 |
13.2 |
DEFINED CONTRIBUTION SCHEMES
The total cost charged to income of £12.7m (2022: £12.6m) 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 £2.2m at the period-end for the defined contribution scheme’s gross contributions (2022: £2.4m).
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 2022. The results from this valuation were updated for IAS 19 Employee Benefits purposes to
30 December 2023 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:
2023 |
2022 |
|
Future pension increases for in-payment benefits (majority of liabilities) |
3.00% |
3.10% |
Discount rate applied to Scheme liabilities |
4.50% |
4.80% |
Inflation assumption (CPI) |
2.65% |
2.80% |
The 2023 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 |
Males’ expected |
Females’ expected |
Females’ expected |
|
future lifetime |
future lifetime |
future lifetime |
future lifetime |
|
2023 |
2022 1 |
2023 |
2022 1 |
|
Member aged 45 |
22.7 |
23.2 |
25.1 |
25.4 |
Member aged 65 |
21.4 |
21.8 |
23.6 |
23.9 |
1
2022 restated.
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 2022, 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:
Assumption |
Change in assumption |
Approximate impact on Scheme liabilities |
Discount rate |
Increase/decrease by 1.0% |
Decrease £22.6m/increase £28.3m |
Rate of inflation |
Increase/decrease by 0.5% |
Increase £8.9m/decrease £8.6m |
Life expectancy |
Members assumed to be one year younger than their actual age |
Increase £5.5m |
32. Retirement benefit schemes
continued
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
208
| Bakkavor Group plc | Annual Report & Accounts 2023
Amounts recognised in income in respect of these defined benefit schemes are as follows:
£m |
2023 |
2022 |
Past service cost |
– |
– |
Net interest on net defined benefit asset/liability |
(0.7) |
(0.7) |
Administration costs incurred during the period |
1.1 |
1.3 |
Total charge |
0.4 |
0.6 |
All of the charges for each period presented have been included in total administrative expenses. The actuarial loss
of £2.9m (2022: £26.3m loss) has been reported in other comprehensive income.
The actual return on Scheme assets was an increase of £10.1m (2022: £119.1m decrease).
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:
30 December |
31 December |
||
£m |
Note |
2023 |
2022 |
Fair value of Scheme assets |
190.0 |
185.9 |
|
Present value of defined benefit obligations |
(178.0) |
(173.1) |
|
Scheme surplus |
12.0 |
12.8 |
|
Related deferred taxation liability |
23 |
(3.0) |
(3.2) |
9.0 |
9.6 |
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 2023 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 fair value of Scheme assets and the present value
of defined benefit obligation (“DBO”) are as follows:
Present value |
Fair value of |
Net |
|
£m |
of DBO |
Scheme assets |
amount |
At 26 December 2021 |
(276.3) |
313.5 |
37.2 |
Past service cost – plan amendments |
– |
– |
– |
Interest (expense cost on the DBO)/income on Scheme assets |
(4.9) |
5.6 |
0.7 |
Administrative costs paid |
– |
(1.3) |
(1.3) |
Total amount recognised in the consolidated income statement |
(4.9) |
4.3 |
(0.6) |
Return on Scheme assets less than discount rate |
– |
(124.7) |
(124.7) |
Actuarial loss – experience |
(13.6) |
– |
(13.6) |
Actuarial gain – financial assumptions |
112.0 |
– |
112.0 |
Total amount recognised in other comprehensive income |
98.4 |
(124.7) |
(26.3) |
Contributions from the sponsoring companies |
– |
2.5 |
2.5 |
Benefits paid from Scheme assets |
9.7 |
(9.7) |
– |
At 31 December 2022 |
(173.1) |
185.9 |
12.8 |
Past service cost – plan amendments |
– |
– |
– |
Interest (expense cost on the DBO)/income on Scheme assets |
(8.1) |
8.8 |
0.7 |
Administrative costs paid |
– |
(1.1) |
(1.1) |
Total amount recognised in the consolidated income statement |
(8.1) |
7.7 |
(0.4) |
Return on Scheme assets greater/(less) than discount rate |
– |
1.3 |
1.3 |
Actuarial loss – experience |
1.9 |
– |
1.9 |
Actuarial gain – financial assumptions |
(6.1) |
– |
(6.1) |
Total amount recognised in other comprehensive income |
(4.2) |
1.3 |
(2.9) |
Contributions from the sponsoring companies |
– |
2.5 |
2.5 |
Benefits paid from Scheme assets |
7.4 |
(7.4) |
– |
At 30 December 2023 |
(178.0) |
190.0 |
12.0 |
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
Bakkavor Group plc | Annual Report & Accounts 2023 |
209
The analysis of the Scheme assets at the statement of financial position date was as follows:
Fair value of assets |
||
30 December |
31 December |
|
£m |
2023 |
2022 |
Structured UK equity |
5.7 |
2.3 |
Overseas equity |
6.8 |
9.9 |
High yield bonds |
6.5 |
8.5 |
Corporate bonds |
45.4 |
50.5 |
Government bonds |
97.9 |
81.3 |
Cash |
8.9 |
9.6 |
Other |
18.8 |
23.8 |
190.0 |
185.9 |
|
The fair values of the equity and bonds have been determined as level 2 instruments under IFRS 7 Financial Instruments.
Index-linked government bonds, which have quoted prices in active markets, 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 31 March 2022.
The Group and the Trustees work closely on 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 15 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 2023, no augmentation was made in respect of this benefit (2022: £nil).
The current deficit reduction contributions were agreed between the Group and the Trustee as part of the 2022 triennial
valuation. The deficit contributions will be paid over a recovery period ending on 31 March 2025. The recovery
contributions are paid monthly and the agreed rates are £2.5m per annum. Contributions could continue through to
31 August 2025 at the rate of £2.5m per annum if the scheme is in deficit on a technical provisions basis at 31 December
2024 and 31 January 2025. £2.5m was paid in the period to 30 December 2023 (2022: £2.5m). The actual amount of
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
210
| Bakkavor Group plc | Annual Report & Accounts 2023
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.
TRANSACTIONS WITH THE BAKKAVOR DEFINED BENEFIT PENSION SCHEME (“THE SCHEME”)
In the period ended 31 December 2022, as a result of the volatility in the gilt markets, the Scheme was required to provide
further collateral for its liability hedging of interest and inflation rate movements. The Group agreed to provide a £15m
short-term line of credit to the Scheme in October 2022 to meet this collateral requirement. The line of credit attracted
interest at a rate of 2.1% plus SONIA and was fully repaid by 23 December 2022.
For the year ended 30 December 2023, there were no such arrangements in place.
SHARE TRANSACTIONS
See Note 35 for details of share transactions by two of the Company’s Directors, Agust Gudmundsson and Lydur Gudmundsson.
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.
2023 |
2022 |
|||||
Senior |
Senior |
|||||
£m |
Directors |
Management |
Total |
Directors |
Management |
Total |
Short-term employee benefits |
3.4 |
2.7 |
6.1 |
3.1 |
1.1 |
4.2 |
Post-employment benefits 1 |
– |
– |
– |
– |
– |
– |
Share-based payments 2 |
0.4 |
0.3 |
0.7 |
0.4 |
0.3 |
0.7 |
3.8 |
3.0 |
6.8 |
3.5 |
1.4 |
4.9 |
1
The Directors’ post-employment benefits show contributions made to pension schemes. The pension entitlements disclosed in the Directors’ remuneration report on pg 127
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 £1.6m (2022: £1.1m).
For the period ended 30 December 2023, two Directors (2022: two Directors) received contributions to their pension
schemes from the Group.
For the period ended 30 December 2023, two Directors (2022: two Directors) received share options. Nil Director (2022:
35. Controlling party
These Financial Statements are the largest Consolidated Financial Statements in which the Company has been included.
Two of the Company’s Directors, Agust Gudmundsson and Lydur Gudmundsson, hold shares in the Company through their
beneficial ownership of Carrion Enterprises Limited (the corporate holding structure of Agust Gudmundsson) and Umbriel
Ventures Limited (the corporate holding structure of Lydur Gudmundsson). On 20 May 2022, Lydur Gudmundsson
purchased 200,000 ordinary shares in the Company. Following the transaction, Umbriel Ventures Limited holds
142,303,505 ordinary shares (representing 24.56% of the issued share capital of the Company) and Carrion Enterprises
Limited holds 142,103,505 ordinary shares (representing 24.52% of the issued share capital of the Company).
Lixaner Co Limited, a company owned and controlled by Sigurdur Valtysson, who runs the family office for Agust and
Lydur Gudmundsson, holds 6,457,750 ordinary shares (representing 1.11% 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 290,864,760 ordinary shares (representing 50.20%
of the issued share capital of the Company).
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
Bakkavor Group plc | Annual Report & Accounts 2023 |
211
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, the effect of foreign currency movements and revenues. In addition, revenues for week 53 are taken out in
the relevant financial years to ensure that like-for-like revenue is shown on a 52 week basis each year.
The following table provides the information used to calculate like-for-like revenue for the Group.
£m |
2023 |
2022 |
Change % |
Statutory revenue |
2,203.8 |
2,139.2 |
3.0% |
Effect of currency movements |
10.4 |
– |
|
Week 53 revenue |
– |
(36.0) |
|
Like-for-like revenue |
2,214.2 |
2,103.2 |
5.3% |
The following tables provide the information used to calculate like-for-like revenue for each segment.
UK
£m |
2023 |
2022 |
Change % |
Statutory revenue |
1,852.7 |
1,783.1 |
3.9% |
Week 53 revenue |
– |
(30.8) |
|
Like-for-like revenue |
1,852.7 |
1,752.3 |
5.7% |
US
£m |
2023 |
2022 |
Change % |
Statutory revenue |
229.4 |
255.3 |
(10.1%) |
Effect of currency movements |
1.2 |
– |
|
Week 53 revenue |
– |
(3.6) |
|
Like-for-like revenue |
230.6 |
251.7 |
(8.4%) |
CHINA
£m |
2023 |
2022 |
Change % |
Statutory revenue |
121.7 |
100.8 |
20.7% |
Effect of currency movements |
9.2 |
– |
|
Week 53 revenue |
– |
(1.6) |
|
Like-for-like revenue |
130.9 |
99.2 |
32.0% |
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, costs incurred to configure or customise
‘Software-as-a-Service’ (“SaaS”) arrangements as defined in the accounting policies, 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.
36. Alternative performance measures
continued
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
212
| Bakkavor Group plc | Annual Report & Accounts 2023
The following table provides a reconciliation from the Group’s operating profit to adjusted operating profit and adjusted EBITDA.
£m |
Note |
2023 |
2022 |
Operating profit |
97.1 |
37.8 |
|
Exceptional items |
7 |
(2.8) |
50.1 |
Configuration and customisation costs for SaaS projects |
– |
1.5 |
|
Adjusted operating profit |
94.3 |
89.4 |
|
Depreciation |
68.7 |
68.3 |
|
Amortisation |
3.0 |
0.7 |
|
Share scheme charges |
2.0 |
1.9 |
|
Loss/(profit) on disposal of property, plant and equipment |
0.1 |
(0.1) |
|
Share of results of associates after tax |
– |
(0.2) |
|
Adjusted EBITDA post IFRS 16 |
168.1 |
160.0 |
|
Less IFRS 16 impact |
(14.0) |
(13.8) |
|
Adjusted EBITDA pre IFRS 16 1 |
154.1 |
146.2 |
|
Covenant adjustments |
0.4 |
0.6 |
|
Adjusted EBITDA (pre IFRS 16 and including covenant adjustments) |
154.5 |
146.8 |
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.
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.
30 December |
31 December |
||
£m |
Note |
2023 |
2022 |
Group net debt |
21 |
(319.3) |
(379.3) |
Unamortised fees |
(1.1) |
(2.6) |
|
Interest accrual |
0.5 |
0.4 |
|
Lease liabilities recognised under IFRS 16 |
90.3 |
96.6 |
|
Group operational net debt |
(229.6) |
(284.9) |
|
Adjusted EBITDA (pre IFRS 16 and including covenant adjustments) |
154.5 |
146.8 |
|
Leverage (Operational net debt/adjusted EBITDA pre IFRS 16 and including covenant adjustments) |
1.5 |
1.9 |
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.
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
Bakkavor Group plc | Annual Report & Accounts 2023 |
213
The definition of free cash flow was amended during the year to be after IFRS 16 capital lease payments to simplify our cash
reporting. The following table provides a reconciliation from net cash generated from operating activities to free cash flow.
£m |
2023 |
2022 |
Net cash generated from operating activities |
147.7 |
127.1 |
Interest received |
0.6 |
0.2 |
Dividends received from associates |
1.6 |
– |
Proceeds on disposal of associates |
3.2 |
– |
Purchases of property, plant and equipment |
(40.4) |
(61.1) |
Proceeds on disposal of property, plant and equipment |
1.6 |
0.1 |
Purchase of intangibles |
(3.5) |
(2.9) |
Cash impact of exceptional items |
4.4 |
2.5 |
Refinancing fees |
– |
0.9 |
Free cash flow (as previously reported) |
115.2 |
66.8 |
IFRS 16 capital lease payments |
(12.0) |
(13.4) |
Free cash flow |
103.2 |
53.4 |
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, configuration and customisation costs for SaaS projects and the change in value of derivative
financial instruments. 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.
£m |
Note |
2023 |
2022 |
Profit for the period |
53.9 |
12.5 |
|
Exceptional items |
7 |
(2.8) |
50.1 |
Configuration and customisation costs for SaaS projects |
– |
1.5 |
|
Change in fair value of derivative financial instruments |
– |
0.1 |
|
Tax on the above items |
– |
(9.4) |
|
Adjusted earnings |
51.1 |
54.8 |
|
Add back: Tax on adjusted profit before tax |
16.4 |
15.0 |
|
Adjusted profit before tax |
67.5 |
69.8 |
|
Effective tax rate on underlying activities |
|||
(Tax on adjusted profit before tax/adjusted profit before tax) |
24.4% |
21.5% |
|
Number of shares ‘000 |
2023 |
2022 |
|
Weighted average number of Ordinary shares |
576,129 |
577,576 |
|
Effect of dilutive Ordinary shares |
12,576 |
9,767 |
|
Weighted average number of diluted Ordinary shares |
588,705 |
587,343 |
|
2023 |
2022 |
||
Adjusted basic earnings per share |
8.8p |
9.5p |
|
Adjusted diluted earnings per share |
8.7p |
9.3p |
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 excluding the impact of exceptional items and configuration and
customisation costs for SaaS projects 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 and end of the period.
The Directors believe that ROIC is a useful indicator of the amount returned as a percentage of shareholders’ invested
capital and 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.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
214
| Bakkavor Group plc | Annual Report & Accounts 2023
36. Alternative performance measures
continued
£m | Note | 2023 | 2022 |
Operating profit | 97.1 | 37.8 | |
Exceptional items | 7 | (2.8) | 50.1 |
Configuration and customisation costs for SaaS projects | – | 1.5 | |
Adjusted operating profit | 94.3 | 89.4 | |
Taxation at the underlying effective rate | (23.0) | (19.2) | |
Adjusted operating profit after tax | 71.3 | 70.2 | |
Invested capital | |||
Total assets | 1,480.3 | 1,541.4 | |
Total liabilities | (872.7) | (923.6) | |
Net debt at period end | 319.3 | 379.3 | |
Derivatives not designated as hedges | – | – | |
Retirement benefit scheme surplus | (12.0) | (12.8) | |
Deferred tax liability on retirement benefit scheme | 3.0 | 3.2 | |
Invested capital | 917.9 | 987.5 | |
Average invested capital for ROIC calculation | 952.7 | 987.7 | |
ROIC (%) | 7.5% | 7.1% |
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
Bakkavor Group plc | Annual Report & Accounts 2023 |
215
OF FINANCIAL POSITION
AS AT 30 DECEMBER 2023
31 December | 31 December | ||
£m | Note | 2023 | 2022 |
Non-current assets | |||
Shares in Group undertakings | 4 | 309.5 | 309.5 |
Current assets | |||
Loans to Group undertakings | 6 | 95.5 | 95.6 |
Deferred tax assets | 0.1 | 0.9 | |
95.6 | 96.5 | ||
Total assets | 405.1 | 406.0 | |
Current liabilities | |||
Loans from Group undertakings | 6 | (2.5) | (1.6) |
Total liabilities | (2.5) | (1.6) | |
Net assets | 402.6 | 404.4 | |
Equity | |||
Called up share capital | 7 | 11.6 | 11.6 |
Own shares held | 7 | (4.4) | (3.1) |
Merger reserve | 7 | 23.8 | 23.8 |
Retained earnings | 371.6 | 372.1 | |
Total equity | 402.6 | 404.4 |
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 £40.0m (2022: £38.5m).
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 4 March 2024. They
were signed on behalf of the Board of Directors by:
Mike Edwards
Ben Waldron
Chief Executive Officer
Chief Financial Officer and Asia Chief Executive Officer
COMPANY STATEMENT OF CHANGES IN EQUITY
52 WEEKS ENDED 30 DECEMBER 2023
Called up | Own | Merger | Retained | Total | ||
£m | Note | share capital | shares held | reserve | earnings | equity |
Balance at 26 December 2021 | 11.6 | – | 23.8 | 371.3 | 406.7 | |
Profit for the period | – | – | – | 38.5 | 38.5 | |
Purchase of own shares | – | (3.1) | – | – | (3.1) | |
Dividends | 7 | – | – | – | (38.8) | (38.8) |
Credit for share-based payments | – | – | – | 1.9 | 1.9 | |
Cash-settlement of share-based awards | – | – | – | (0.6) | (0.6) | |
Deferred tax | – | – | – | (0.2) | (0.2) | |
At 31 December 2022 | 11.6 | (3.1) | 23.8 | 372.1 | 404.4 | |
Profit for the period | – | – | – | 40.0 | 40.0 | |
Purchase of own shares | 7 | – | (2.4) | – | – | (2.4) |
Dividends | 7 | – | – | – | (40.8) | (40.8) |
Credit for share-based payments | – | – | – | 2.0 | 2.0 | |
Proceeds from exercise of share options | – | – | – | 0.2 | 0.2 | |
Equity-settlement of share-based payments | – | 1.1 | – | (1.1) | 0.0 | |
Deferred tax | – | – | – | (0.8) | (0.8) | |
At 30 December 2023 | 11.6 | (4.4) | 23.8 | 371.6 | 402.6 |
NOTES TO THE COMPANY FINANCIAL STATEMENTS
52 WEEKS ENDED 30 DECEMBER 2023
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 activity of the Company is that of a holding company. The principal activities of the Company’s 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:
a. The requirement of IFRS 7, Financial Instruments: Disclosures.
b. The requirements of paragraphs 91–99 of IFRS 13, Fair Value Measurement.
c. 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.
d. 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.
e. The requirement of IAS 7, Statement of Cash Flows.
f.
The requirements of paragraphs 30 and 31 of IAS 8, Accounting Policies, Changes in Accounting Estimates and Errors.
g. The requirements of paragraphs 17 and 18A of IAS 24, Related Party Disclosures.
h. The requirements in IAS 24, Related Party Disclosures, to disclose related party transactions entered into between two
or more members of a group.
i.
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.
j.
The requirements of paragraphs 45(b) and 46 to 52 of IFRS 2, Share-based Payment.
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.
In assessing impairment, judgement is required to establish whether there have been any indicators of impairment, either
internal or external. Where there is a need to determine the recoverable value of an investment this requires judgements
and assumptions related to the expected future cash flows to be derived from the investment.
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 30 December 2023 amounted to £95.5m (2022: £95.6m).
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 £0.1m (2022: £0.1m) to the Company’s Auditors in respect of the audit of the Company’s Financial
Statements for the periods ended 30 December 2023 and 31 December 2022 have been borne by fellow Group company
Bakkavor Foods Limited.
The Company has 11 Directors (2022: 11 Directors) and no further employees. Payments to the Directors for the periods
ended 30 December 2023 and 31 December 2022 have been borne by fellow Group company Bakkavor Foods Limited.
Details of Directors’ remuneration are disclosed within Note 33 of the Consolidated Financial Statements.
4. Shares in Group undertakings
£m
Investment in
Group companies
Balance at 31 December 2022 and 30 December 2023
309.5
216
| Bakkavor Group plc | Annual Report & Accounts 2023
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
5. Subsidiaries
As at 30 December 2023, 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
30 December
2023
% of voting
shares as at
31 December
2022
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 Limited
1
UK
Holding company
100%
100%
Bakkavor USA Inc
2
US
Holding company
100%
100%
Bakkavor USA Limited
1
UK
Holding company
100%
100%
Bakkavor Foods USA Inc
2
US
Manufacture of fresh prepared meals
and bakery products
100%
100%
Bakkavor China Limited
1
UK
Holding company
100%
100%
Bakkavor Bakery Holdings Limited
3
Hong Kong
Holding company
100%
100%
Bakkavor Hong Kong Limited
3
Hong Kong
Preparation and marketing of fresh prepared foods
100%
100%
Bakkavor China Holdings Limited
3
Hong Kong
Holding company
100%
100%
Wuhan Bakkavor Food Company Limited
4
China
Manufacture of salad products
100%
100%
Wuhan Bakkavor Agricultural Product Processing
Company Limited
17
China
Manufacture of salad products
100%
100%
Jiangsu Bakkavor Food Company Limited
5
China
Manufacture of salad products
100%
100%
Shaanxi Bakkavor Food Company Limited
6
China
Manufacture of salad products
100%
100%
Beijing Bakkavor Food Company Limited
7
China
Manufacture of salad products
100%
100%
Guangzhou Bakkavor Food Company Limited
8
China
Manufacture of salad products
100%
100%
Bakkavor (Shanghai) Management Company Limited
9
China
Holding company
100%
100%
Shaanxi Bakkavor Agriculture Processing
Company Limited
10
China
Manufacture of salad products
100%
100%
Fujian Bakkavor Food Company Limited
11
China
Manufacture of salad products
100%
100%
Bakkavor (Taicang) Baking Company Limited
12
China
Manufacture of bakery products
100%
100%
Chengdu Bakkavor Foods Company Limited
13
China
Manufacture of salad products
100%
100%
Bakkavor Foods Limited
1
UK
Manufacture of fresh prepared foods
100%
100%
Bakkavor Estates Limited
1
UK
Property management
100%
100%
Bakkavor Pension Trustees Limited
1
*
UK
Pension trustee holding company
100%
100%
Bakkavor European Marketing BV
14
Netherlands
Holding company
100%
100%
NV Bakkavor Belgium BV
15
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.
16
Spain Distribution
100%
100%
Bakkavor Central Finance Limited
1
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%
Bakkavor (London) Limited
1
*
UK
Dormant non-trading company
100%
100%
Bakkavor Finance 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
Dormant non-trading company
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%
Notsallow 256 Limited
1
*
UK
Dormant non-trading company
100%
100%
Bakkavor Group plc | Annual Report & Accounts 2023 |
217
NOTES TO THE COMPANY FINANCIAL STATEMENTS
CONTINUED
Name
Place of
registration and
operation
Principal activity
% of voting
shares as at
30 December
2023
% of voting
shares as at
31 December
2022
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
17
Hong Kong
Operation of bakery and food and beverage outlets
0%
45%
Patisserie et Chocolat Limited
17
Hong Kong
Operation of bakery and food and beverage outlets
0%
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 2700 Westinghouse Boulevard, Charlotte, NC 28273.
3
The registered address of these companies is Units 1902-1912, 19/F., Eight Commercial Tower, No 8 Sun Yip Street, Chai Wan, Hong Kong.
4
The registered address of this company is Mujiajing ZhangDuHu Farm, Xinzhou District, Wuhan, China.
5
The registered address of this company is Agricultural Development Area, Changle Town, Haimen City, Jiangsu Province, China.
6
The registered address of this company is Qinghua Keji Garden, Middle of Shiji Road, Xianyang City, Shanxi Province, China.
7
The registered address of this company is South Xitai Road, Da Sun Gezhuang Town, Shunyi District, Beijing, China.
8
The registered address of this company is No. 55 Banyutang Road, High Tech Development Area, Guangzhou, China.
9
The registered address of this company is Room 01, 3A Floor, Number 16 Lane 1977, Jinshajiang Road, Putuo District, Shanghai, China.
10 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, China.
11 The registered address of this company is Jiulong Industry Park of Hua An Economic Development Zone, China.
12 The registered address of this company is Taicang City, No 29 Qingdao East Road, China.
13 The registered address of this company is Rong Tai Road, Cross-Straits Science & Technology Industry Development Park, Wenjiang District, Chengdu, China.
14 The registered address of this company is Prins Bernhardplein 200, 1097 JB Amsterdam, The Netherlands.
15 The registered address of this company is Lammerdries-Zuid 16F, 2250 Olen, Belgium.
16 The registered address of this company is Calle Cartagena 57, 1º D Torre Pacheco, Murcia CP 30700, Spain.
17 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, China.
* These companies are UK dormant companies which 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
£m
30 December
2023
31 December
2022
Financial assets and liabilities
Measured at amortised cost:
Loans to Group undertakings
95.5
95.6
Loans from Group undertakings
(2.5)
(1.6)
7. Called up share capital and reserves
CALLED UP SHARE CAPITAL
£m
30 December
2023
31 December
2022
Issued and fully paid:
579,425,585 (2022: 579,425,585) Ordinary shares of £0.02 each
11.6
11.6
All Ordinary shares of £0.02 (2022: £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.
5. Subsidiaries
continued
218
| Bakkavor Group plc | Annual Report & Accounts 2023
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
OWN SHARES HELD
During the period ending 31 December 2022, the Company began purchasing shares through an Employee Benefit Trust
called the Bakkavor Group plc Employee Benefit Trust (the “Trust”). Own shares purchased are recorded at cost and
deducted from equity.
The number of Ordinary shares held by the Trust at 30 December 2023 was 4,567,073 (31 December 2022: 2,940,514).
This represents 0.79% of total called up share capital at 30 December 2023 (31 December 2022: 0.51%).
Total cash purchases made through the EBT during the year amounted to £2.4m (2022: £3.1m).
£m
Number of
shares
£m
Balance at 1 January 2023
2,940,514
3.1
Acquisition of shares by the Trust
2,688,310
2.4
Distribution of shares under share scheme plans
(1,061,751)
(1.1)
Balance at 30 December 2023
4,567,073
4.4
No own shares held of Bakkavor Group plc were cancelled during the period.
DIVIDENDS
Reporting period ended
Dividend
per share
Declared
Date paid
Number of
dividend rights
waived
1
Amount paid
30 December 2023
Interim dividend
2.91p September 2023
13 October 2023
3,264,816
£16,766,278
31 December 2022
Final dividend
4.16p
May 2023
5 June 2023
2,886,522
£23,984,025
Interim dividend
2.77p
September 2022
14 October 2022
2,492,273
£15,981,053
25 December 2021
Final dividend
3.96p
May 2022
30 May 2022
2,439,135
£22,848,663
1
Dividend rights waived in relation to Ordinary shares held in the Bakkavor Group plc Employee Benefit Trust.
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:
£m
30 December
2023
31 December
2022
Loans to Group undertakings
95.5
95.6
Loans from Group undertakings
(2.5)
(1.6)
Loans to Group undertakings relate to corporate loans of £95.5m (2022: £95.6m) due from Bakkavor Finance (2) Limited.
These amounts are unsecured and will be settled in cash. The loans are repayable within 60 days of being given notice by the
lender. 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 £2.5m (2022: £1.6m) due from Bakkavor Foods Limited.
Loans from Group undertakings do not carry interest on the outstanding corporate loan balances.
The Company purchases its own shares through an Employee Benefit Trust, see Note 7.
9. Events after the statement of financial position date
There are no events after the statement of financial position date that need to be disclosed.
10. Controlling party
The controlling party of the Company and its subsidiaries are described within Note 35 of the Consolidated Financial Statements.
Bakkavor Group plc | Annual Report & Accounts 2023 |
219
GENERAL COUNSEL AND COMPANY SECRETARY
Annabel Tagoe-Bannerman
REGISTERED OFFICE
Fitzroy Place, 5th Floor
8 Mortimer Street
London
England
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
40 Clarendon Road
Watford
WD17 1HZ
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
ADVISERS AND REGISTERED OFFICE
220
| Bakkavor Group plc | Annual Report & Accounts 2023
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Bakkavor Group plc
Fitzroy Place, 5th Floor,
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London, England, W1T 3JJ
Bakkavor Group plc. Company No: 10986940
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Annual Report & Accounts 2023
Bakkavor Group plc