Alongside its interim results, food company Bakkavor (BAKK) has announced the acquisition of Haydens Bakery for £12m. The deal, designed to "increase the breadth and depth" of its dessert range, will be funded with £9.6m in cash, and £2.4m-worth of existing finance leases. Haydens generated around £31.3m in sales during the year to March 2017, and broke even at the operating level, but management believes it can grow sales to £50m, generating £3m of incremental cash profits, implying a 20 per cent return on invested capital. The baking specialist will also make use of Bakkavor’s facility in Newark, which is currently undergoing expansion.
The international business is still a relatively small proportion of group revenues, but it’s the fastest growing division, focusing primarily on the US and China. During the first half, international sales rose 15.4 per cent on a like-for-like basis to £99.7m, or 8.6 per cent when accounting for the strength of sterling. This compares with the larger UK business, where sales were up 1.4 per cent on an underlying basis to £810m. The reported period was impacted by cost inflation and subdued consumer demand, but growing demand for healthier options is expected to support the chilled food market.
Analysts at Numis expect pre-tax profits of £99.1m during 2018, giving EPS of 14.6p, up from £84.8m and 13.3p in 2017.
| BAKKAVOR (BAKK) | ||||
| ORD PRICE: | 178p | MARKET VALUE: | £1.03bn | |
| TOUCH: | 176-178p | 12-MONTH HIGH: | 215p | LOW: 170p |
| DIVIDEND YIELD: | 1.1% | PE RATIO: | 16 | |
| NET ASSET VALUE: | 97p* | NET DEBT: | 48% | |
| Half-year to 30 Jun | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2017 | 903 | 8.2 | 1.4 | 0.0 |
| 2018 | 910 | 47.1 | 7.0 | 2.0 |
| % change | +1 | +474 | +400 | - |
| Ex-div: | 13 Sep | |||
| Payment: | 05 Oct | |||
| *Includes £651m of intangible assets, or 112p a share | ||||
