Ready meals giant Bakkavor has made its first acquisition as a listed group after snapping up sweet bakery specialist Haydens Bakery from Real Good Food for £12m.
Haydens bakes premium tarts, pies and crumbles, Danish pastries, sweet buns, yum yums and doughnuts. It sells principally to major retailers and provides a distribution operation for one major customer.
The deal involves a cash payment to beleaguered Real Good Food of £9.6m and the assumption of £2.4m of third-party debt.
In the financial year ended 31 March 2017, Haydens generated £31.3m of revenues and was break-even at the operating profit level.
Bakkavor said the deal increased the “breadth and depth” of its desserts range with key customers and said it expected to realise “meaningful operational synergies”.
It also noted a recent investment of £15m at Haydens had created significant extra capacity and “state-of-the-art automation”.
Broker Kepler said the deal - at just 0.4x sales - “seems to come at favourable terms” and fits well within its UK portfolio.
Real Good Food, which has lost more than 70% of its value over the past year amid profit warnings, cashflow pressures and emergency fundraising rounds, will use the proceeds to pay down debt.
The acquisition comes as Bakkavor announced its first results as a listed business, with sales increasing by 0.8% (or 2.8% like-for-like) to £910.4m in the six months to 30 June £910.4m.
International sales rose 15.4% on a like-for-like basis. UK revenues fell by £0.3m to £816.6m - like-for-like growth of 1.4%, excluding the Melrow Salads business, which closed in November 2017 and Anglia Crown, which was sold in July 2018.
Bakkavor said that after a relatively slow start to the year, volumes started to increase from April and it had also benefited from better pricing in this period due to the inflationary environment. The group posted adjusted EBITDA up 1.2% to £78.6m, and margins held at 8.6% in an inflationary environment as investments in operational efficiencies partly offset rising labour costs.
CEO Agust Gudmundsson said the group “continues to remain cautious and anticipates little change in underlying economic and market trends”.
“In particular, input price volatility continues which may in turn impact consumer demand,” he said. “Despite these pressures, our scale, passion for food and close partnerships with our customers leave us well placed and our expectations for the full year remain unchanged.”
Kepler noted UK sales growth was weaker than expected, despite improved volumes in the second quarter, but that margins were “a touch better” than forecasts despite significant cost headwinds.
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