Avara Foods has pledged to streamline its business after posting a second successive loss in its annual accounts.
The leading poultry supplier’s latest accounts, for the financial year ended May 2023, showed an increase in turnover to over £1.5bn, but an overall loss of £12.8m after taxation. That represented an improvement of £3.3m on the May 2022 result.
The financial performance reflected a continuing tough trading climate, with new inflation driving costs higher and further depressing underlying demand, according to the company.
Chief executive Andy Dawkins said: “Given the anticipated prevailing economic and market conditions, financial performance for the period is in line with expectations. Avara’s higher turnover has arisen from the inflationary pressure that has been well documented over the period, but this significant rise does not fully offset the total increase in production costs, resulting in an overall loss after taxation.”
Dawkins noted that the cost-of-living crisis has led to more cautious purchasing behaviour by consumers, leading to short-term oversupply in the market. This, alongside wider market challenges, has driven a change in approach, he said, with business reorganisation necessary to meet a structural change in the market.
Optimisation strategy
In response, Avara explained that it has adopted a “pragmatic and flexible” approach, focusing on the fundamentals of an optimised supply chain, which is able to better offset inflationary pressures through productivity, efficiency and dependable customer service.
Its turnaround strategy is focused on fewer, but better-invested facilities, and optimising the processing footprint to drive efficiency and productivity.
“The proposed streamlining of Avara’s operational footprint requires difficult decisions but, thanks to a solid financial position with no bank borrowing, it has the financial resilience to take a deliberate approach, with difficult decisions managed sensitively and fairly,” Dawkins said.
The restructure is due to complete within the 2023/24 financial year.
Sustainability progress
Reporting on what it called “a year of turbulence and change”, Avara stressed that its commitment to being an ethical and responsible business, underpinned by its core values, remained constant.
On the sustainability front, the company said it had made further progress, which included completing full assessments of the potential impact of climate change on its business for TCFD reporting and establishing a detailed understanding of its own (Scope 1 and 2) carbon emissions, as well as those of its wider supply chain (Scope 3).
Two years after first setting science-based targets, Avara said it is reducing carbon emissions ahead of target and was the first business in its sector to join the product-level carbon footprinting project, led by the BRC Mondra coalition, working with its major supermarket partners.
“We have worked hard with our customers to navigate the balance of covering costs while maintaining an affordable product for consumers,” Dawkins explained. “In the face of almost unprecedented inflation, it is perhaps unsurprising that not all costs have been recouped.
“Looking ahead our focus is in three areas: ensuring that our business completes its streamlining and optimisation plan to provide customers with great quality and value, while mitigating the impact of inflation; investing in growth in our successful added-value product ranges with our partner customers; and meeting our commitments to be a responsible business, helping those same customers fulfil our shared climate goals.”
In the year ahead Avara said it anticipates that conditions will remain difficult, but expressed confidence that its plans will yield benefits. “We’re very confident that fresh poultry will remain a staple in shopping baskets and that demand will remain strong,” Dawkins said. “The actions that we have started to put in place will put us in a stronger position financially and able to meet demand for our increasingly popular portfolio of products.”