Avara Foods has reported annual sales of £1,194 million in the year ending 31 May 2021, down from £1,207 million during the previous year.
Profits at the company after taxation but before exceptional costs during 2021 were £16.9 million, compared to £17.1 million in 2020.
During the period, Avara made the decision to close its duck business. The accounts state the effect on turnover during 2021 was a reduction of £17.5 m.
Avara Foods is responsible for 20% of the UK’s poultry production, supplying around 4.5 million chickens a week. It also has one of the UK’s two year-round turkey businesses. It is an integrated business with its own hatcheries, farms and feed mills, as well as eight major processing plants in the UK, and employs around 7,300 people.
During the period covered in the report, the UK left the EU with a new trade deal that came into effect on 1 January 2021. According to the report this involved a “significant investment” in admin costs to manage the transition and enable it to continue to export fresh product to the EU. “Our Brexit team continue to monitor the position, escalate issues and work with the British Poultry Council and Defra to optimise and simplify new EU export processes.”
The company’s ongoing additional admin and logistics costs relating to Brexit are £2.5 million a year.
The report outlines how demand for fresh poultry increased during the pandemic, and the company was well placed to meet this demand. However, it reveals the company’s turkey business was more adversely impacted, because it is focussed more heavily on supplying foodservice businesses rather than retail.
“The long pipeline for turkey means this sector is unlikely to recover fully until 2022.” The report reveals it is now planning to restructure its turkey business. “The imbalance in Avara’s turkey supply chain created by covid lockdowns and now compounded by seasonal labour following Brexit, is expected to continue into 2022. Working with customers and our farming partners, a new operating model will be introduced to ensure this sector is sustainable, can meet customer demand and financially supports the reinvestment required.”
“Given all the challenges and uncertainty this is a solid set of results,” said Andy Dawkins, chief executive of Avara Foods. “Throughout the trading period we prioritised spend on our teams’ safety and maintaining product throughput for our customers, even where this reduced margins. To deliver financial performance that is consistent with the year before, against a backdrop of such change, is a testimony to the focus and drive of the whole team at Avara.
“The next 12 months are proving far more challenging, however, and the pressure we began to see in the last quarter of our 2020/21 financial year on labour has continued, resulting in a significant investment in pay last autumn. Added to labour, cost inflation, rising energy prices, the ongoing disruption of covid and seasonal avian influenza in the UK all hitting at the same time, have created a perfect storm for our sector.”
“In our view, navigating short term challenges is all about taking a long-term view and keeping focused on what’s most important. For us, that means protecting the health and wellbeing of everyone at Avara, carrying out our business ethically and responsibly, running efficient supply chains focused on our customers and making targeted investments to automate our operations. Doing all of these things well will enable us to tackle the ongoing unprecedented challenges we face and set us up for future success.”
