Pre-tax profit 17.4 million GBP in 2003

Bakkavör Groups pre-tax profit for 2003 amounted to 17.4 million GBP. Working capital from operations amounted to million 15.8 GBP and increased by 3.6% from last year and are the Group’s operations characterised by the strong cash flow during the year. Cash flow from operating activities amounted to 19.8 million pounds and increased by 45.5% from the previous year. Sales increased by 3% between years and amounted to 137.9 million GBP. Sales from continuing operations amounted to 126.6 million GBP and increased by approximately 20% from last year which is fully consistent with the Group’s goals. Bakkavör Group’s operations changed considerably during the year when it sold its seafood operations in seven countries to Fram Foods h.f. and with the sale, the Group’s dealings for 17 years in the seafood business ended.  With the sale of the seafood operations and the bond offering which took place in May the Group’s balance sheet changed significantly as stocks decreased from 11.8 million GBP to 4.3 million GBP and cash in funds increased from 1.4 million GBP to 57.9 million GBP. After the sale of the seafood business the Group’s operations are now focused on manufacturing chilled convenience food for retailers in the UK. The Group now operates two subsidiaries, Katsouris Fresh Foods in London and Bakkavör Birmingham in Birmingham.

The board of directors of Bakkavör Group hf. approved the results of the Group for the year 2003 at a board meeting on the 30th of January. The annual statement has been audited by the Group’s accountants and signed without comment. The same accounting principles have been applied this year as last year.

The annual statement can be viewed at Bakkavör Group’s office at Sudurlandsbraut 4 and on the Group’s website www.bakkavor.com

Operations in the year 2003

The Group’s operations during the year were good and fully consistent with the Group’s expectations. The last quarter of the year is generally the best sales period of the year and 2003 was no exception. Sales during the festive season exceeded budget with the Group placing special emphasis on Christmas snack products during December and this year it sold more to its customers than ever before in the last weeks of the year. The sales increase between years in the month of December was 30%. Sales year to date increased by 20%.

Bakkavör Group’s operations changed considerably during the year when it sold its seafood operations in seven countries to Fram Foods h.f. and with the sale the Group’s dealings for 17 years in seafood operation ended. The seafood operations were characterised by seasonal fluctuations with the first part of the year being fairly quiet with regards to sales and in 2003 the first part of the year was also characterised by price reductions in seafood which led to the EBITDA ratio being lower, particularly in the first quarter. The continuing operations of Bakkavör Group for the latter part of 2003 comprise its two subsidiaries, Katsouris Fresh Foods in London and Bakkavör Birmingham in Birmingham.

Operating income from continuing operations have increased by 20% year on year and amounted to 105.9 million GBP compared to 126.6 million GBP last year.  EBITDA was 22.4 million GBP compared to 22.8 million GBP last year. The decrease in EBITDA is primarily due to the sale of the seafood operations during the year which constituted 20% of the Group’s operations. In spite of that the Group’s EBITDA only decreased by 1.7%. The increase in turnover was 3.1% year on year compared to 225.7% increase from the year before. In the last quarter of the year the Group’s EBITDA ratio was 17.6% compared to 17.8% the year before and only decreased by 0.2% in spite of the fact that the last quarter was the main sales period of the year for the seafood operations.   

The ratio to revenues was 16.3% compared to 17% last year. Working capital from operations amounted to 15.8 million GBP compared to 15.3 million GBP last year and increased by 3.61%. Cash flow from operating activities amounted to 19.8 million GBP compared to 13.6 million GBP last year and increased by 45.5%. Exchange rate changes have minimal effect on the Group´s operations as earnings are reported in GBP.

The Group’s EBIT was 18.3 million GBP compared to 19.4 million GBP last year and decreased by 5.5%. As stated earlier this is primarily due to the sale of the seafood operations during the year.  Financial expenses amounted to 4 million GBP. Taxes for the period amounted to 3.8 million GBP.  Profit from the sale of the Seafood Group amounted to 3.1 million GBP. The net result was therefore 13.5 million GBP.

Cash flow from operations was good during the year. In 2003 working capital from operations generated 15.8 million GBP. The Group brought down its bank debt by 12.1 million GBP and invested 5.7 million GBP primarily in new equipment and facilities for the Group’s factory in Birmingham with the purpose of enabling the Group to expand its portfolio. The new factory which was opened towards the end of 2002 was also completed during the year.

Balance Sheet

The balance sheet of Bakkavör Group changed considerably in the year as a result of the sale of the seafood operations as well as the bond offering that took place during that period.

Stocks have decreased during the year from  11.8 million GBP to 4.3 million GBP or by 7.5 million GBP and accounts receivables have decreased from 18.7 million GBP to 15.5 million GBP or by 3.2 million GBP.

Bakkavör’s equity has increased by 13.4 million GBP since 2002 or by 23% and the equity ratio is now 41% including the subordinated loan. Return on equity 21% which is the same as last year. The current ratio is 2.77 which is a 169% increase from last year. The Group has 57.9 million GBP available in cash and unused revolvers amounting to 11.6 million GBP.

Markets

The UK is now the Group’s main market and it has also been the fastest growing market in the manufacturing and sales of chilled convenience food in Europe in recent years. Sales in chilled convenience food are expected to continue to increase rapidly in the UK in the coming years.  

Products

After the sale of the seafood operations last year the Group now focuses on manufacturing chilled convenience food for retailers in the UK. With the sale the Group stopped manufacturing value-added seafood and seafood no longer constitutes a specific product category for the Group. Our main raw materials are now meat and vegetables. We divide our products into four categories, chilled ready meals, accompaniments, ethnic snacks and  dips, dressings and sauces. All product categories have grown during the year but the most significant increase is in chilled ready meals which have grown by 34% year on year and accompaniments which have grown by 42% year on year. These product categories are expected to continue to grow and market forecasts predict an annual growth rate of 8% on average in the next 5 years.

New Product Development

The market for chilled convenience food is characterised by a high level of new product development and the continuous renewal of products on the market is the key to increased demand. The Group’s new product development activities remained high during the year and over 260 new products were launched. Innovation is the key to the Group’s organic growth and it will continue to place great importance on this aspect of its operations. The Group expensed all costs in new product development during the year.

Shareholders

Shareholders in Bakkavör Group were 3,715 at year end 2002. 48% of shares are held by the management and key employees, of which 29% is held by the founders of the Group, Agust and Lydur Gudmundsson through the holding company Bakkabræður S.a.r.l. 39% of shares are held by institutional investors and 19% are held by investors outside of Iceland. The share value continued to increase during the year and increased by 56%. Earnings per share was 1,33 and increased by 24,3% in 2003.

Dividends

The board of directors has decided that no dividends be paid out for the year 2003. The board considers that while the Group is expanding rapidly on foreign markets it will be better for the Group and its shareholders to pay out dividends at a later date. The Group’s shares have also been very liquid and it has been easy for shareholders to sell their shares.

Operating prospects

Bakkavör’s operating prospects for the coming year are good. The Group’s management expects the company to continue to grow rapidly on its markets and is also working on projects which will lead to further expansion in the near future.

Annual General Meeting and publication of interim statements in 2004

The annual general meeting will be held on Friday the 20th of February, at 17:00 at Salurinn, Concert Hall, Kopavogur. Anticipated publication dates of the year´s interim statements are as follows:

1st Q:               30th of April

2nd Q              30th of July

3rd Q               29th of October

For further information please contact:

Ágúst Guðmundsson, Chairman of the Board of Directors of Bakkavör Group hf.

Tel: +44 7900 901 384

Lýður Guðmundsson, CEO of Bakkavör Group hf.

Tel: +44 7900 901 385

List of 20 largest shareholders 29.01.2004

Annual Statement 2003