BAKO North Western (Group) Limited
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BAKO North Western (Group) Limited Annual Report & Financial Statements For the year ended 31 March 2020 Company Registration Number: 08802727 2 COMPANY INFORMATION Directors J Hall (Chair) J Hill D Hindley A Moore D Yates D Walker (Senior Independent Non-Executive Director) D Ghee (Independent Non-Executive Director) A Sutton (Independent Non-Executive Director) Company registration number 08802727 Registered office 74 Roman Way Industrial Estate Longridge Road Preston Lancashire PR2 5BE Auditor RSM UK Audit LLP Chartered Accountants Bluebell House Brian Johnson Way Preston PR2 5PE Bank HSBC UK Bank Plc 1 Forest Green Caxton Road Preston PR2 9LJ 3 STRATEGIC REPORT Highlights Revenue Gross Profit £122.4m £23.9m 2019 (restated): Shareholder 2019 (restated): £120.9m £23.8m Rebate £0.3m 2019 (restated): Profit Adjusted £0.3m EBITDA Before Tax and Rebate £6.5m £2.8m 2019 (restated): 2019 (restated): £5.8m £1.7m • Highest EBITDA ever reported • Highest ever shareholder rebate • BAKO South Eastern reports a trading profit for the first time since acquisition • 171 new shareholders taking total membership up to 580 • Over 6,500 customers, including approximately 3,000 bakers • BRC accreditations achieved at Grade A or above for all 3 Group sites • Mental Health first aiders appointed at each Group site • 100% of electricity supplied from renewable energy sources • Transition from UK Generally Accepted Accounting Practice (UK GAAP) to International Financial Reporting Standards (IFRS) BAKO North Western (Group) Limited 4 STRATEGIC REPORT (CONTINUED) Group overview BAKO North Western (Group) Limited services customers throughout the United Kingdom with business units in Durham (BAKO Northern & Scotland), Preston (BAKO North Western) and Wimbledon (BAKO South Eastern). The trading operations are supported by a Group head office function in Preston. The Group functions of Executive Management, Finance, Human Resources, IT and Commercial Services provide support to the business units and ensure the Group works in a coordinated approach towards its strategic goals. The Group takes pride in being owned by bakers for bakers and delivers a UK-wide service and product range that are highly valued by its customers. The Group’s Purpose of “A co-operative business, owned by bakers, for bakers; sustaining the British baking industry for future generations” reinforces the ethos with which the Group operates. The Group specialises in the wholesale supply of bakery ingredients and finished goods, operating a multi temperature vehicle fleet to provide a one-stop shop for bakery and food service products. Executive Management Team Michael Tully: Group Chief Executive Officer Michael has worked in the bakery ingredients sector since 2004 firstly as General Manager at BFP Wholesale and then as Chief Executive Officer at Bako Northern and Scotland. He was appointed Group Chief Executive Officer in October 2017. In his time at BAKO, he has led the restructure of the Group’s cost base and built the Executive Management Team. Kirti Hirani: Group Chief Financial Officer Kirti is a Fellow of the Institute of Chartered Accountants of England and Wales and started his career as an auditor before going on to various roles in finance. He joined the Group in May 2017 and was appointed Chief Financial Officer in October 2017. Kirti was a key part of the restructure of the Group’s cost base and has driven improvements in controls, proccesses and reporting. Kirti also acts as the Company Secretary for the Group and oversees the Group’s IT department. Ian York: Managing Director BAKO Northern Western Ian joined the business in June 2020 bringing with him over 25 years first-hand experience of Sales, Marketing, & Operations in the food industry. Operating at board-level in manufacturing, wholesale and retail companies such as Premier Foods, Cambridge Commodities, Poundstretcher, Symingtons and The Tofoo Company, Ian is firmly focused on customer growth and profit. Nicholas Harris: Managing Director BAKO South Eastern Nicholas has many years of experience in food distribution and manufacturing, including 21 years as the Managing Director of BFP Wholesale. After a short time out of the industry he launched the new BFP as part of Kent Foods before joining the Group in January 2018. Away from BAKO he also serves as an advisor on the NFU Sugar Board representing the 3,000 growers providing sugar beet for British Sugar. Nicholas has been insturmental in delivering an operating profit at BAKO South Eastern for the first time since its acquisition in 2013. Paul Long: Managing Director BAKO Northern and Scotland Paul has developed his career in the baking industry with roles at UCB and Rank Hovis McDougall, where he was appointed General Manager of Fleming Howden. Paul joined BAKO as Managing Director for BAKO Northern and Scotland in September 2018, bringing with him over 20 years of experience in the industry. Paul has increased the return generated from this division and developed a senior management team that can grow the division for many years to come. 5 STRATEGIC REPORT (CONTINUED) Review of the business Group performance year was adjusted for costs For the year ended 31 March incurred in merging the Norwich 2020 the Group significantly operation with Wimbledon of £0.2 improved its profitability with profit million, a share-based payment before tax growing 65% from the charge of £0.3 million and £0.3 prior year to £2.8 million (before million of shareholder rebate. member rebates of £0.3 million). A reduction in cost base was the Cash generated by operating primary driver of this activities for the Group was £5.5 improvement. The turnaround of million (2019: £6.0 million) with BAKO South Eastern Limited stock holdings increasing by £0.7 continues apace with the division million. Cash required for reporting its first operating profit investing activities was limited as since its acquisition by the Group no major capital expenditure was million (2019: £2.3 million before in 2013. undertaken and proceeds of £1 intercompany loan waivers). The million were received from the division maintains a significant Turnover for the year saw an sale of excess land. Financing market share in the North West of increase of £1.5m to £122.4 activities consumed net cash of England despite an increase in million (2019: £120.9 million) with £6.0 million (2019: £5.5 million), competition in the region. an improvement in gross profit to which includes a £3.1 million £23.9 million (2019: £23.8 (2019: £3.0 million) reduction in BAKO South Eastern achieved million). the Group’s invoice discounting operating profitability for the first facility and £2.6 million of time since its acquisition in 2013 repayments against lease reporting a profit before tax of obligations (2019: £2.1 million). £0.1m (2019: £0.6 million loss The Group’s cash and cash before tax, loan waivers and equivalents as at 31 March 2020 dilapidations provision). The were £2.8 million (2019: £2.8 turnaround was delivered by million) and external debt was growing turnover to £29.5 million significantly reduced from £6.5 (2019: £24.7 million), a 19% million at 31 March 2019 to £3.6 increase over the prior year. The million, resulting in net debt as at results evidence the success of 31 March 2020 of £0.8 million. the turnaround plan initiated in 2018 and the focus now moves to As at 31 March 2020 the Group’s growing the profitability of the net assets were £10.0 million depot. The Group’s adjusted Earnings (2019: £7.8 million). Before Interest, Tax and BAKO Northern & Scotland Depreciation (EBITDA) saw a Divisional performance generated turnover of £38.4 significant increase to £6.5 million The Group’s largest operating million (2019: £38.4 million) and a from the prior year’s adjusted company, BAKO North Western, profit before tax of £1.9 million EBITDA (as restated) of £5.8 achieved turnover of £54.5 million (2019: £1.7 million before million. The EBITDA for the year (2019: £55.6 million) which intercompany loan waivers). The was adjusted for a share-based represents a slight fall on the prior business successfully retained its payment charge of £0.4m relating year as some large volume low revenue and margin despite to the Executive Incentive margin contracts were operating in a mature market with Scheme and the shareholder intentionally not renewed. Profit increased competition. rebate. The EBITDA for the prior before tax for the year was £2.3 BAKO North Western (Group) Limited 6 STRATEGIC REPORT (CONTINUED) Members measures were implemented and The Group has been actively remote working instigated for recruiting new members to its those that could work from home. shareholder base and had recruited 171 new members by As an essential supplier to the 31 March 2020, taking the overall food industry, BAKO operated number of members to 580. throughout the lockdown period Member customers contributed a ensuring continuity of supply to its full year equivalent of £32.4 customers, many of whom form a million to the Group’s annual vital part of their local revenue. communities. Initiatives such as online sales direct to consumers Eligible bakers and confectioners were launched in response to are invited to become members scarcity of staple goods in reduce costs during the period of at a cost of £40 for 40 £1 Ordinary supermarkets. BAKO extended lockdown and Management are shares. Membership allows the their appreciation for the work confident that trade will gradually customer to participate in the carried out by NHS staff by gifting return to levels seen before the member rebate scheme whereby products to front line staff who outbreak. Operational efficiencies they receive a proportion of any were working tirelessly realised during the period of annual member rebate based on throughout the lockdown and lockdown will be implemented on their purchases relative to total beyond.