PRE-TAX profits at Avara Foods have swung from £22.7m in the year to 31 May 2021 to a loss of £21.3m in the same period a year later.
Turnover was broadly flat, at £1.194m in y/e May 2021 and £1.263m in the following 12 months.
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Directors said the firm had faced a “very challenging trading year”, citing Brexit, covid and Russia’s invasion of Ukraine as major disrupting factors.
The strategic report says that labour problems, which it describes as “an unanticipated consequence of Brexit”, came to a head in Summer 2021.
“This resulted in a short-term fall in overall throughput, with available labour being prioritised to deliver core products and support strategic customers. This negatively impacted Avara’s margin mix until interventions to focus on improving staffing levels could take effect.”
There were inflationary pressures “not seen for a decade”, with cost inflation “slow to pass through the supply chain”.
“At the same time, some suppliers appear to have responded to this change in market dynamics by prioritising volume over price, further compounding an already challenging trading environment.”
Avara said its customers had responded with “double-digit” price increases. However, year-on-year inflationary costs amounted to almost £85m.
In addition, trading problems brought about by avian influenza caused associated costs of £5m.
“With a starting point of industry-wide low margins, these market changes have stressed financial resilience and tested liquidity,” the directors add.
“Avara management have responded by focusing investment on critical capital projects and ensuring Avara exited the year with low gearing and full headroom in working capital facilities.”
Avara expected another challenging year, with cost pressures and supply chain disruption continuing until the conflict in Ukraine was resolved. Inflation in both inputs and labour costs was also anticipated.
“In addition, against a backdrop of lower demand, competition amongst suppliers to keep supply chains full is anticipated to trigger further industry uncertainty and possibly change.”