Bakkavor Group PLC on Wednesday said it has continued to trade in line with guidance, but expects annual adjusted operating profit to be at the lower end of guidance due to a ‘contractual dispute with a customer’ in the US.

Shares were down 5.6% at 89.15 pence each on Wednesday morning in London.

For the third quarter of 2022, the London-based fresh prepared food company said revenue increased by 15% to £542.5 million, with like-for-like revenue up 13%.

Particularly in the UK, revenue grew 12% to £445.3 million, with LFL revenue growth of 12%; while revenue in China climbed 13% to £29.7 million with LFL growth of 1.5%.

Bakkavor said UK LFL revenue growth was ‘largely driven by price’. It said volumes held up through the summer and, although pressure on household budgets impacted volumes in September, the company outperformed the fresh prepared food market and gained market share. 

The company added that volumes in China have ‘continued to recover, with LFL revenue ahead of financial year 2021, and this has supported some margin improvement’.

Furthermore, US revenue rose by 46% to £67.5 million, with LFL revenue growth of 26%. Bakkavor said strong US revenue momentum ‘reflects sustained demand and price increases also taking effect’.

Chief Executive Officer Mike Edwards said: ‘We continue to operate in an incredibly challenging environment. Bakkavor has proven itself to be a resilient business effectively navigating the turbulence of recent years. We are now taking further decisive action to ensure we deal with the ongoing headwinds and protect future profits.’

Looking ahead, Bakkavor said it has continued to trade in line with market expectations, and preparations for the Christmas period are progressing in line with its plan.

It expects its adjusted operating profit for financial year 2022 to be at the lower end of range of market guidance of between £88.6 million to £91.7 million, with consensus at £90.3 million. This would be up to 13% lower than the adjusted operating profit of £102.0 million the company reported for financial year 2021. This is due to a reduction in volume in the US ‘due to a contractual dispute with a customer’, which is expected to impact profits in the remaining weeks of the year‘, the company explained.

In September, Bakkavor had said pretax profit slipped 6.1% to £32.5 million for the 26 weeks that ended on June 15 from £34.6 million the year before, but revenue was up 10% to £1.01 billion from £915.7 million.

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