Bakkavor Group Completes Exit from China with Strategic Sale

Bakkavor Group plc has announced a significant strategic move by selling its China operations for £50 million. This sale is set to enhance profit margins and reduce leverage.

Date: 29-04-2025

AI Rating: 7

Strategic Exit from China
Bakkavor Group plc has finalized the sale of its entire issued share capital of Bakkavor China Holdings Limited. This transaction, valued at about £50 million, marks a critical step in Bakkavor's strategy to streamline operations in China, where the company faced challenges impacting its profit margins. Bakkavor plans to use the proceeds to mitigate its leverage, enhancing its financial health.

Net Assets and Profit on Disposal
The company reported a carrying value of net assets at £39 million as of December 28, 2024, with an expected net profit on disposal of approximately £15 million. This positive cash inflow from the sale will help in strengthening the balance sheet and potentially provide room for future growth investments.

Margin Enhancement
The exit from the Chinese market is expected to support Bakkavor's medium-term margin target of 6%. Given that the Chinese operations had been a drag on adjusted operating profit margins, this divestiture aligns well with the company's broader strategy of focusing on profitable segments.

Revenue Context
In the fiscal year 2024, Bakkavor generated £105 million in revenue from its operations in China. Removing this operational burden could allow for a more robust focus on markets that align better with Bakkavor's strategic goals, potentially leading to improved prevalence in other regions.

Granted the expected regulatory approval, the successful execution of this transaction has the potential to reinforce investor confidence and could positively impact stock price movements, making it an attractive option for investors with a medium-term outlook.

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